Could the US Lose its Triple AAA Credit Rating?

Tuesday, April 15, 2008 | 12:30 PM

That's the issue raised by a S&P report on government-sponsored enterprises (GSEs) -- Fannie Mae (FNM), Freddie Mac (FRE) & Sallie Mae (SLM)

The performance of government-sponsored enterprises like Fannie Mae and Freddie Mac could have a direct impact on the national economy and, more importantly, U.S. credit standing.

So-called GSEs enjoy implicit government guarantees and could cause the U.S. to lose its sterling triple-A rating if the government were forced to come to their rescue, Standard & Poor's said in a report Monday.

"Even though...credit damage from GSEs is unlikely, the greater risk to the U.S. lies with them than with broker-dealers," the report noted. . . . While this credit crunch has hurt financial markets, S&P notes that it hasn't threatened the standing of the nation's credit quality upon which U.S. Treasurys and debt priced off this government debt depend. But should a protracted recession cause Fannie and Freddie to buckle, the U.S. rating would be in danger.

To be blunt, I don't think Standard & Poor has the stones. Their original ratings on RMBS/CDOs shows they are a pay-for-play institution, and their cowardly refusal to downgrade the mono duolines is further proof of their cowardice.

They wouldn't/couldn't downgrade Treasuries, as it would cost the U.S. government so much more in financing costs as to cause a depression -- estimates are for between 1-1.5 trillion dollars.






Source:
Fannie, Freddie Could Hurt U.S. Credit
PRABHA NATARAJAN
April 15, 2008; Page C2
http://online.wsj.com/article/SB120818189112412691.html

Tuesday, April 15, 2008 | 12:30 PM | Permalink | Comments (40) | TrackBack (0)
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Comments

Good points, Barry, but I don't think S&P has to lower U.S. debt ratings, if Fannie/Freddie get into trouble, for the U.S. to pay higher interest charges. The rest of the world, from whom we borrow so much, will consider us a greater credit risk, with or without a ratings downgrade.

Posted by: SausalitoMike | Apr 15, 2008 12:47:18 PM

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