US MORTGAGE agencies Freddie Mac and Fannie Mae are likely to have their credit ratings cut by Standard & Poor’s today after its downgrade of the US sovereign debt rating last week.
S&P is likely to lower the two government-backed housing agencies to AA+ from triple A due to their dependence on the US government after placing them on negative outlook in July.
Its decision will be closely watched after a bitter backlash from the US government against S&P stripping the sovereign of its prime rating.
The US Treasury said S&P’s debt calculation was wrong by about $2 trillion (£1.2 trillion).
“The magnitude of their error combined with their willingness to simply change on the spot their lead rationale in the press release once the error was pointed out was breathtaking,” said National Economic Council head Gene Sperling.
S&P admitted the error but said that did not affect its decision and warned that further political infighting could make it worse.
“If the fiscal position of the United States deteriorates further or if the political gridlock becomes more entrenched, then that could lead to a downgrade,” said S&P managing director John Chambers.
Billionaire Warren Buffett also waded into the debate, arguing that the US still merited a top rating.
“In Omaha, the US is still triple A. In fact, if there were a quadruple A rating, I’d give the US that,” he said.
But fund manager Terry Smith said S&P’s rationale was right regardless of the numbers. “It is hardly surprising that America’s creditworthiness is in doubt as it is the only major economy where government spending as a percentage of GDP has risen since the onset of the crisis,” he said.
S&P said yesterday that France’s triple A credit rating was safe and its outlook confirmed as stable.