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.
Fannie, Freddie Could Hurt U.S. Credit
April 15, 2008; Page C2