Free Markets, Free People


S & P downgrades Freddie Mac and Fannie Mae

Following the downgrading of the US sovereign debt, S&P has also downgraded the credit ratings of the two quasi-government agencies, Freddie Mac and Fannie Mae, to the same level as the US (AA+). The reason given by S&P:

The downgrades of Fannie Mae and Freddie Mac reflect their direct reliance on the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship in September 2008 and their ability to fund operations relies heavily on the U.S. government. 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.

The projected cost to bailout Fannie and Freddie through 2020 is estimated to be between $373 billion and $376 billion.  The agencies which Barney Frank assured us were in fine financial shape are, in fact, giant money pits.  They are indeed reliant upon the US government for their subsidy as is obvious by the future funding that’s being planned for them.  It is believed that approximately $291 billion dollars was necessary in 2009 to prop up the two agencies.

Of course it is possible that the administration will try to attack this finding by S&P as well.  However, the reality is the agency’s downgrade has indeed had an effect, no matter how hard the administration and various Democrats attempt to attack the messenger.   Everyone has known at some point it wasn’t a matter of “if” the US debt would be downgraded, but “when”.   And all the grousing and griping we’ve seen the last few days, all the attempts at blame-shifting and attack politics don’t change that simple bit of reality.  Freddie Mac and Fannie Mae’s downgrade simply puts a cherry on the downgrade sundae.

~McQ

Twitter: @McQandO

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7 Responses to S & P downgrades Freddie Mac and Fannie Mae

  • It is laughable the two GSEs that are in receivership had a AAA rating to begin with.  It is laughable that government with 100% of GDP in debt and a plan to pile on more had a AAA rating.  I’m laughing so hard I think I’m going to puke.
    If someone dare says, “No one saw this coming.” then lunch is coming right back up.

    • our debt/GDP ratio is now 135% and that “You have to add in Fannie Mae and Freddie Mac to the US Government public sector debt to get the correct debt balance of $20 trillion vs. a GDP of $14.8 trillion.”

  • “ S&P has also downgraded the credit ratings of the two quasi-government agencies, Freddie Mac and Fannie Mae,”

    What? Just because they have lost hundreds of billions of dollars and only exist because of frequent taxpayer subsidies? Wait till Barnie hears about this. He will set S & P straight.

    But seriously, WTF?????  They had a AAA rating???  And they only downgraded them one notch, to AA+??? I guess this just goes to show  that the private sector isn’t necessarily any smarter or more competent than the public sector.

    • Under the outstanding leadership of Democrats like Franklin Raines and Barney Frank …

  • So where were S & P, Moody’s and the other rating agencies in 2008 when the sh*t hit the fan?  Next we will see Obama attack the rating agencies just as the Italian police did last week in Milan.
    http://www.guardian.co.uk/world/2011/aug/04/police-raid-milan-moodys-standard-poors

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