♠ Posted by Emmanuel in Credit Crisis
at 8/09/2011 05:57:00 PM
As hinted in my earlier post, the aftermath of the downgrade of American sovereign debt further involves marking down other credit instruments ultimately guaranteed by the US of A when push comes to shove. Government sponsored enterprises Fannie Mae and Freddie Mac--already haemorrhaging billions and billions of dollars--are next in the firing line. Far more potentially deleterious for various localities is the pending downgrade of municipal bonds. With nearly all American states bleeding bright red chunks, it does not bode well for their costs of funding--less able as they are to take advantage of "exorbitant privilege" reserved for federal debt. From the Associated Press:
Officials at Standard & Poor's are downgrading the credit ratings of mortgage lenders Fannie Mae and Freddie Mac and other agencies linked to long-term U.S. debt.Worse is yet to come Stateside. Much worse.
The agency says it has also lowered the ratings for: farm lenders; long-term U.S. government-backed debt issued by 32 banks and credit unions; and three major clearinghouses, which are used to execute trades of stocks, bonds and options.
All the downgrades were from AAA to AA+. S&P says the agencies and banks all have debt that is exposed to economic volatility and a further downgrade of long-term U.S. debt.
Officials at Standard & Poor's say they will also indicate shortly how local and state governments will be affected by their decision on Friday to lower the long-term U.S. debt from AAA to AA+.
