S&P puts Fannie, Freddie on ratings watch due to US debt concerns
The U.S. government's failure to reach a consensus on raising the debt ceiling by Aug. 2 could have a devastating effect on government mortgage firms Fannie Mae and Freddie Mac, Standard & Poor's said in a report Friday. The New York-based ratings agency placed triple-A bond ratings held by Fannie, Freddie and other government entities on negative 'credit ratings watch' citing the firms' reliance on the U.S. government, which is facing a debt downgrade of its own. S&P's decision to put the GSEs on negative ratings watch arrived after it placed the country's triple-A sovereign credit rating on watch in response to lawmakers' failure to reach a consensus on raising the debt ceiling. S&P also put triple-A rated debt issued by 30 financial firms under the Temporary Liquidity Guarantee Program on negative ratings watch along with ratings tied to the Federal Home Loan Banks and U.S.-based clearinghouses. A central securities depository and the Farm Credit System Banks also were put on credit ratings watch due to concerns over the U.S. debt ceiling and those firms dependence on federal funds. "The CreditWatch action follows the placement of the sovereign credit rating on the U.S. on CreditWatch with negative implications," S&P said. "Although we still believe that risk of a payment default on U.S. government debt obligations as a result of not raising the debt ceiling is small (though increasing), any default on scheduled debt-service payments on the U.S.'s market debt, however brief, could lead us to lower our long-term and short-term sovereign credit ratings on the U.S.," the ratings agency wrote in a report. Write to Kerri Panchuk.