When the credit crisis hit in 2007/2008 the biggest mortgage lenders in the U.S., Fannie Mae and Freddie Mac, suddenly became too big to fail and were taken over by the U.S. government. The move had U.S. taxpayers providing the mortgage giants with almost consistent quarterly bailouts.
Now Standard & Poor’s has downgraded their credit rating, from triple A, to double A+. ‘Bout time!
The two mortgage companies, along with a third called Ginnie Mae, guarantee 80% of the mortgages in the United States. Fannie and Freddie have received $141 billion in taxpayer bailouts, so far.
Standard & Poor’s is also downgrading U.S. Federal Home Loan banks. Federal Home Loan banks support consumer credit by providing money to other banks, in the form of bank to bank loans.
Standard & Poor’s is warning that a French plan to “rollover” Greek debt will force Greece into default. The plan was put forth by the Fédération Bancaire Française.
S & P’s is not the only finance rating company to make such a claim. It’s complicated, but basically they claim the French plan would result in current “investors” in Greek bonds receiving much less of a return on their investment, so much so that S & P’s is willing to declare Greece in default.
The plan was approved by the only economic powerhouse in the European Union: Germany.
“In our view, Greece’s near-term reliance on European Union and International Monetary Fund official financing, the government’s difficulty in reducing its sizable fiscal deficit, and the current pricing of Greek government debt in the secondary market all underscore the Hellenic Republic’s weak creditworthiness and, consequently, point to a ‘realistic possibility’ that financing option would fit the ‘distressed’ category.”-Standard & Poor’s
Standard & Poor’s has reduced Japan’s rating from stable to negative. The cut is in regards to Japan’s sovereign debt (things like bonds).
S & P says the cost of rebuilding after the March 11 disasters, will raise Japan’s estimated debt load beyond 2013.
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