The bankruptcy judge overseeing the largest bankruptcy filing in U.S. history said Tuesday he is “looking at a whole bunch of options” to help banks with the fallout from the collapse of one of the world’s largest derivatives markets.
Fitch Ratings, which said on Tuesday it expects a loss of $100 billion in a second-quarter, said in a statement that its latest estimate of the market’s potential loss of roughly $200 billion was based on data it said show that “there is some risk” of a collapse of a similar market, which it said has existed for years.
Fitch cited several factors including the global spread of derivatives and the fact that most derivatives are traded on an exchange, which makes it easier for financial markets to collapse, and the inability of regulators to monitor the market and protect the public from risk.
Fannie Mae and Freddie Mac, the two U.N.-backed government-sponsored enterprises, also had major losses in the second-half.
The companies’ combined net worth has been estimated at $1.2 trillion, according to Forbes magazine.
In the second quarter, Fannie Mae, which oversees the mortgage and mortgage-backed securities markets, reported a net loss of about $3.1 billion on $19.7 billion in assets, while Freddie Mac’s loss was $6.2 billion, according the company.
On Tuesday, Fitch reported that the losses from the second half of the year exceeded its forecast of $200 million.
“We do not see a significant improvement in the liquidity situation for the next two quarters, especially given the market situation, but we are in an optimistic position that we may have a reasonable recovery of the losses for the remainder of the financial year,” said Jefferies analyst Daniel Noyes.
The company has estimated that the market could recover to about $300 billion, down from $400 billion in the previous quarter.
The government agency that oversees the derivatives markets is the Federal Reserve.
The U.K. government also runs the Treasury Department.