Implications of U.S. Government’s Takeover of Fannie Mae and Freddie Mac

In light of Sunday’s announcement that the U.S. government is taking over (the Takeover) the operations of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), money managers, fund companies, pension funds, and other institutional investors need to evaluate the implications for their portfolio holdings, including both cash instruments and derivatives. Although industry participants have begun to discuss the implications, particularly with respect to credit default swaps, there are still many open questions regarding the impact of this unprecedented event.

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