Fannie, Freddie Debt Deferral May Not Trigger Swaps

Buyers of credit-default swap contracts that protect against losses on Fannie Mae or Freddie Mac subordinated debt may not get paid immediately if the mortgage-finance companies were to defer interest payments as part of a government bailout, according to Bank of America Corp.

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A capital injection by the government, on its own, isn't likely to trigger credit-default swaps, he wrote.

``Such an injection would effectively make the government an owner of the agencies, without taking control of day-to-day operations,'' Taksler wrote. ``But, to be clear, an actual opinion would depend on all the information available at the time of a potential event.''