Tuesday, August 09, 2011 10:50:00 AM
WASHINGTON - Credit rating agency Standard & Poor's (S&P) on Monday downgraded the credit rating for government-sponsored enterprises(GSEs) Fannie Mae and Freddie Mac, as well as the ratings applied to the NCUA's Guaranteed Notes (NGN), from AAA to AA+.
The NGN downgrade impacts all NGNs issued by the agency. NGN sales netted a total of $50.5 billion to fund the resolution of troubled corporate credit unions. These investments received a zero risk weight due to their federal government backing.
S&P also cut the U.S. government's credit rating to AA+ Friday, saying that the recently approved deficit reduction plan didn't do enough to re-insert stability in the country's debt situation. Government debts and securities were downgraded.
S&P said that the GSE downgrade was tied to Fannie and Freddie's "direct reliance" on the U.S. government. The GSEs have been held under U.S. government conservatorship since 2008.
Another credit rating agency, Fitch Inc., late last month said that Fannie Mae and Freddie Mac will require continued capital injections from the Treasury Department to avoid being unwound.
CUNA Chief Economist Bill Hampel said that the downgrade on U.S. Treasury securities has had no impact on Treasury interest rates, "and as long as that is the case, there would appear to be little if any impact on Fannie, Freddie or other agency debt."