Fannie Mae Files $15.8 Billion in Claims in Lehman Brothers Bankruptcy

November 6, 2009 by · Leave a Comment
Filed under: Legal News 

Now we are getting more information on the OTC derivative market and the different liabilities that the different players had with their counter-parties.  The more I am reading about these products (got a nice book on the subject that was written in 1993) and the more I read the more derivatives sound like insurance.

You know what that means? It means they should be regulated like an insurance product and that means the companies issuing this insurance needs strict capital requirements and their capital can only be invested in the safest financial instruments which we used to call “AAA” before the quality rating became a backroom Wall Street joke.

“Based on Lehman Brothers’ financial condition, we believe we will only receive a portion of these claims,” Washington- based Fannie Mae said in a filing with the Securities and Exchange Commission yesterday. The announcement came as the company posted its ninth-straight quarterly loss, of $18.9 billion, and said it will need $15 billion more in federal aid.

This is the first time Fannie Mae has quantified its exposure to derivatives and trading agreements with New York- based Lehman, an underwriter of mortgage bonds that succumbed to the subprime home-loan crisis Sept. 15, 2008, with what was the biggest bankruptcy filing in history. Fannie Mae’s claims would make it the fifth-largest creditor, according to a list maintained by Epiq Systems, Lehman’s claims’ administrator.

Fannie Mae said in a bankruptcy filing last year that Lehman, once the fourth-largest U.S. investment bank, owed it “very substantial sums.”

Fannie Mae, which was seized by regulators about a week before Lehman’s bankruptcy because of questions about its capital reserves, did record $811 million in losses on the Lehman agreements for the third quarter of 2008. Fannie Mae hasn’t disclosed any losses stemming from the Lehman bankruptcy so far this year, according to securities filings.

Source: Bloomberg

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