GSE takeovers create a defined credit event

The change in risk created by the government takeover of FNM and FRE constitutes an event that will cause the settlement of 1.4 trillion dollars in derivatives.  The actual affect is not known because the contracts are not standard.  Each one is individually written.  At least Bush did one thing right.  He required all of these contracts to be in writing instead of verbal as in the past.

The best case is trades are completed without loss in value but fees on 1.4 trillion of derivatives is permanently gone.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ajsxbVS.W2lQ