Skip to comments.Fannie, Freddie bailout triggers credit default swaps($1+ trillion derivative contracts involved)
Posted on 09/08/2008 9:54:53 PM PDT by TigerLikesRooster
Fannie, Freddie bailout triggers credit default swaps
More than $1 trillion of derivative contracts will need to be settled
By Alistair Barr, MarketWatch
Last update: 1:30 p.m. EDT Sept. 8, 2008
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.
(Excerpt) Read more at marketwatch.com ...
Does the other side really have the cash? Or is this $1T that is “out of the money?”
I’ve read an article saying that the likely cost of the bailout will be $2.5 trillion and at least $1.3 trillion.
Glenn Beck had someone on tonight saying $2.7 and $1.3 trillion respectively.
This is going to be a fun ride. For anyone who doesn’t know, $2.7 trillion is roughly the amount the government spends per year already.
Depending on the CDS reactions, this bailout could turn out to be the biggest financial disaster of all time. I wonder how this will affect Collateralized Debt Obligations; I assume CDOs are closely related to the CDS market, but not entirely sure how.
So how many normal people were helped out by this bit of corporate welfare.
Stupid question for you, we (the taxpayers) are only on the hook for the non-performing loans right? The non-performing quite a bit less than the amount stated or am I not understanding the full situation?
If they cannot perform, the Fed will monitize.
JHFC. I know what that means. I’m screwed again.
Just the beginning. Extreme leverage in derivatives. Unknown dependencies to fall out of the sudden shock to the system. Quants never figured in that FNM and FRE would go bankrupt.
A great big house of cards is about to come down. The treasury just pulled a couple of floor level players.
Roll that around on your tongue a few times.
A THOUSAND billion dollars.
Washington don't even measure things in the billions anymore, let alone millions. Now that they've graduated to Trillions, there's no looking back.
A thousand BILLION dollars! On this one transaction alone..
This may be the scarriest thing ever reported on FR. If the OTDs are “insured” by other derivitives, a cascade will begin which will not be easily stopped. This is my greatest fear in regards to this mess. It will ignite a sort of nuclear chain reaction, at worst case scenario. We will see.
The scariest words in the English language are: "I'm from the Government, and I'm here to help."
I have a bad feeling about this. A very bad feeling.
Another bunch of money grabbing sobs trying to cash in. Ok, I have 50 major credit default dealers who unanimously agreed that a credit event did not occur. We will get our lawyers together and talk about it for the next 100 years; at which time, a trillion dollars will be worth a buck ninety five and the debt will be settled!
Welcome to the Socialist States of America where nobody is allowed to fail.
Perhaps Juan should have realized the potential for unintended consequences (!!!) when he advocated a taxpayer-funded FNM/FRE bailout.
But, of course, why should the politician care, since he won't have to pay for any of the damage? And, he still gets votes!
Note well the media reports from way back in July when McCain advocated bailing out Fannie Mae and Freddie Mac with taxpayer money.
And Freepers have the gall to say that voting McCain is a vote against Obama's Socialism, when McCain himself is also advocating Socialism.
1. Government bailout is going to be horrifically expensive. ("Horrific" not even really scratching the surface of how bad it really is.)
2. No government bailout could wind up being even worse.
3. No one has any other options.
Am I missing something, or are we just catastrophically screwed at this point? It seems that the damage has already been done, and that sans some amazing developments in time travel technology, we can't undo a bit of it. As much as I'd like to jump on McCain and Obama about this, I don't really know what else they are supposed to do?
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