Following its historic downgrade of the U.S., Standard and Poor’s has predictably cut the rating of Fannie Mae and Freddie Mac to ‘AA+’ from ‘AAA.’ At the same time, the agency affirmed the short-term ‘A-1+’ rating on these government-related entities, while removing them from CreditWatch Negative, where they have been since July 15.
Fannie and Freddie’s downgrades reflect their reliance on the government, having been put in conservatorship in September, 2008. “In addition to the implicit support we factor into our ratings, the U.S. Treasury has demonstrated explicit support by providing these entities with capital quarterly, as necessary,” S&P said in a release.
The agency also lowered by one notch the issuer ratings of ten of the 12 Federal Home Loan Banks (FHLBs) and the senior debt issued by the Federal Farm Credit Banks, to ‘AA+.’ The two FHLBs that escaped the downgrade — those of Chicago and Seattle — were already ‘AA+.’
