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Politics : Welcome to Slider's Dugout

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From: maxncompany	9/8/2008 1:40:12 PM
	of 50768

Fannie, Freddie bailout triggers credit default swaps By Alistair Barr, MarketWatch Last Update: 9/8/2008 1:30:00 PM SAN FRANCISCO (MarketWatch) - The U.S. government's seizure of Fannie Mae and Freddie Mac has triggered more than $1 trillion of credit default swaps tied to the mortgage giants. The International Swaps and Derivatives Association said in a memo on Monday that 13 major credit default swap dealers unanimously agreed that a credit event had occurred. After a conference call this morning, the ISDA said it will launch a protocol to help traders settle these derivatives contracts. The protocol will contain details of an auction that will take place to determine the value of the agreements to be settled. Credit default swaps are a common type of derivative contract that pay out in the event of default. Fannie (FNM) and Freddie (FRE) are major counterparties in the derivatives market, with roughly $2.3 trillion of notional exposure built up by efforts to hedge the interest-rate risk of their mortgage operations.

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