This follows the recent revelation that the German bund was given a higher credit rating than US Treasuries for the first time in history. Now, another warning that taking Fannie Mae and Freddie Mac loans onto the balance sheet of the US government will affect the United States’ credit rating. Obviously, this is not good news if it occurs.
“A market bombshell released yesterday by Standard & Poor’s left many industry participants unsure of just what to think next, as the rating agency surprisingly suggested that the credit risks now being taken on by both Fannie Mae and Freddie Mac – as well as the Federal Home Loan Banking system — may be sufficient enough to threaten the U.S. government’s ‘AAA’ sovereign credit rating. ‘We believe [the GSEs] pose large contingent fiscal risks that recent policy decisions aimed at supporting the U.S. mortgage market have made even larger,’ wrote S&P’s John Chambers and Nikola Swann, who co-authored the report released on Monday. ‘If these risks were to translate into increased government debt, they could even hurt the U.S.’s credit standing.’