Fannie, Freddie to clear interest rate swaps

[FarCenter]

Mar 12, 2010 05:12 EST - By Ann Saphir
BOCA RATON, Fla., March 11 (Reuters) - Fannie Mae and Freddie Mac, the mortgage-funding giants that were seized by the government in September 2008, will start using central counterparty clearing this year in a move that could mark a seismic shift in the $400 trillion global swaps market.
The administration, regulators and lawmakers want to shift more derivatives — seen by some as a cause of the financial crisis that deepened the worst recession since the 1930s — into clearinghouses, where they may pose less of a systemic financial risk. Clearers stand between trades.
But dealers profit from the system as it stands now, and Commodity Futures Trading Commission Chairman Gary Gensler on Thursday painted them as reluctant to shift from the opaque world of off-exchange derivatives to regulated clearinghouses, such as those run by CME Group Inc <CME.O> and LCH.Clearnet.
The decision to move Fannie and Freddie’s combined swaps portfolio — among the largest in the United States at $3 trillion — to clearing gave notice the government is putting its money where its mouth is.
<SNIP>http://blogs.reuters.com/financial-regulatory-forum/2010/03/12/fannie-freddie-to-clear-interest-rate-swaps/

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Your government at work in the derivatives market. Apparently, Fannie and Freddie are about 20% of the intrest rate swaps derivative market - per http://ftalphaville.ft.com/blog/2010/03/12/174246/a-3000bn-shift-in-the-interest-rate-swaps-market/

[Ozymanithrax]

1. Sacrificing some profit for a little stability? How socialist.

:sarcasm:

It is a pitty they can push the rest of the market to do this.