S&P Hands Out More Downgrades


It wasn’t just Uncle Sugar that got downgraded by Standard and Poor’s (emphasis in original):

Meanwhile, S&P downgraded government-sponsored enterprises Fannie Mae and Freddie Mac to AA+ from triple-A, with S&P citing their reliance on U.S. government.

Ten of the country’s 12 Federal Home Loan Banks were also cut to AA-plus. The banks of Chicago and Seattle had already been downgraded earlier to AA+.

Fannie and Freddie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. As part of a nationalized system, they account for nearly all new mortgage loans. Their downgrade might force anyone looking to buy a home to pay higher mortgage rates.

S&P also cut ratings for several of the main arteries of the U.S. financial system—the Depository Trust Co.,National Securities Clearing Corp., Fixed Income Clearing Corp. and the Options Clearing Corp.—were cut one notch to AA-plus.

These institutions, previously rated triple-A by S&P, clear and process trades, and are crucial to the daily workings of the U.S. financial markets.

In issuing the downgrade, S&P explained it was not the result of any company-specific event.

“We have not changed our view of the fundamental soundness of their depository or clearing operations,” S&P said.

S&P said its decisions were based on what it called shifts in the macroeconomic environment and the long-term stability of U.S. capital markets. S&P gave the four depository and clearing institutions negative outlooks.

Officials at S&P said they plan to indicate how local and state governments and insurers will be affected by the rating agency’s downgrade of long-term U.S. debt.

The credit agency now rates 13 states at triple-A.

S&P is looking at the impact of the country’s debt consolidation plan agreed on Aug. 2 on the budgets of states and municipalities, David Beers, the head of the agency’s sovereign ratings group, said on Monday.

S&P also downgraded five insurers to double-A-plus from triple-A: Knights of Columbus, New York Life, Northwestern Mutual, TIAA and USAA.

Even Berkshire Hathaway Inc, the heavyweight insurer run by billionaire investor Warren Buffett was swept up in the wholesale credit revisions, with S&P affirming its AA-plus rating but cutting the company’s outlook to negative.

Four of Berkshire’s peers suffered the same fate: Assured Guaranty, Guardian, Massachusetts Mutual, and Western & Southern.

Essentially, the country’s whole financial system is starting to fall apart, and it’s starting at the top, with the government-backed Fannie and Freddie.

These downgrades also make it a lot more laughable for the lefties to try to blame Tea Party politics for the reductions in ratings. Not that they won’t keep trying the blame game–it’s all they have left, after all–but anyone with more than two functioning brain cells who looks at that list of downgrades will find the accusation ludicrous.

But what do you expect when Obama put spending into ludicrous speed? He seems to be sharing Dark Helmet’s fate now… alas, so are the rest of us.

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About Conservative Wanderer

Conservative Wanderer is currently Editor-in-Chief of That's Freedom You Hear! That means anything that goes wrong can be blamed on him. Previously he was a contributor to the PJ Tatler.
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