NEW YORK CITY-Reflecting their direct reliance on the US government, Standard & Poor’s downgraded senior credit ratings on mortgage lender Fannie Mae and Freddie Mac after the global ratings agency walloped the financial community by lowering America’s long-term credit rating from AAA to AA+ late Friday.
S&P has also lowered the ratings on 10 out of the 12 Federal Home Loan Banks and the senior debt issues by the FHLB system, as well as the senior debt issued by the Federal Farm Credit Banks, to AA+ from AAA. The outlooks for all 12 FHLBS, and the issue level ratings for Fannie Mae, Freddie Mac, the FHLB system and the Farm Credit System are all negative.
Fannie and Freddie were placed into conservatorship in September 2008, and S&P says “their ability to fund operations relies heavily on the US government.” In a statement, it linked the FHLB system’s debt on par with the US sovereign rating: “The implicit support that we factor into the issuer and issue credit ratings relates to the important role the FHLBs and the FHLB System play as primary liquidity providers to US mortgage and housing-market participants,” S&P says.”
At the same time, S&P’s ‘A’ subordinated debt rating and its‘C’ rating on the preferred stock of these entities remain unchanged.
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