Seizure of Fannie, Freddie triggers massive CDS default

09/9/2008 | Financial Times (free content)

In the credit-derivatives market, seizing control and placing Fannie Mae and Freddie Mac into a conservatorship is the equivalent of the companies declaring bankruptcy, which triggers a default on their credit-default swaps. Dealers are working on how to unwind billions of dollars in contracts. Because of the market's private nature, the exact amount of CDS on the mortgage giants is unknown, but it is expected to be substantial.

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