derivatives trading

Fannie Mae and Freddie Mac are issuing new mortgage bonds this year, which would transfer the risk of default to private investors on all but the safest mortgages, The Wall Street Journal's Joe Light reports. The hope is the new bonds will expand the market for home mortgages as well as prevent taxpayers from being on the hook if another mortgage crisis develops.

Light notes that almost all of the U.S. housing market currently depends upon guarantees from government-backed entities. But the Federal Housing Finance Agency, which regulates Fannie and Freddie, has set a goal for the companies to transfer most of the risk on new mortgages to private investors.

The federal insurance exchange for consumers to shop for health-care insurance policies might be extremely problematic but an exchange for financial instruments started off well, according to The Washington Post's Q&A with  the chairman of the Commodity Futures Trading Commision. Derivatives now must be traded on the exchange.

Chairman Gary Gensler explained: "'A swap execution facility is where buyers and sellers of a special derivative called a swap can meet to enter into contracts. Think of an exchange, like the New York Stock Exchange for stocks or exchanges for futures. These kinds of exchanges have been regulated by the federal government since the 1930s. But swap execution facilities had not been under any oversight. [As part of Dodd-Frank,] Congress decided to repeal these exemptions, with the public benefiting from greater transparency in these markets."'