BofA Sees Potential 'Disaster' in Credit Default Swap Market

January 28, 2008 12:35 PM EST
According to reports from Bloomberg, citing a Bank of America research report, a default of a bond insurer, like ACA Capital (OTC: ACAH), could trigger a "disaster" in the credit-default swaps market.

The report said, ACA Capital may face delinquency proceedings from Maryland Insurance Administration because it can't pay $60 billion of credit-default swaps. The firm said even a credit event for a relatively small monoline, like ACA, could have significant implications. They see huge potential problems for settling credit-default swaps contracts.