Tuesday, August 09, 2011

S & P Credit Drop Extended to Fannie and Freddie

Standard & Poor's on Monday downgraded the credit ratings of
Fannie Mae, Freddie Mac and several other U.S. government
entities, reflecting their dependence on federal support.

Ten of the 12 Federal Home Loan Banks, which also provide
funding for home loans, also received downgrades. Two of the
Federal Home Loan Banks--of Chicago and Seattle--already had the
lower AA-plus credit rating. The downgrades of Fannie and
Freddie reflect the mortgage firms' "direct reliance" on the U.S.
government, S&P said. Fannie and Freddie depend on the U.S.
government's support to stay afloat, and therefore would be on a
shaky footing if the U.S. ever defaulted on its debt.

Fannie and Freddie, which were placed under federal control in September 2008, receive infusions
of cash from the Treasury Department on a quarterly basis if
their net worth drops below zero. Stabilizing the two firms has
cost taxpayers $141 billion so far.

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