S&P lowers more ratings

A SWATHE of US institutions were stripped of their gold-plated credit ratings by Standard & Poor’s as the fall-out from the downgrade of the US rating agency continued yesterday.

As Moody’s weighed its decision to hold the US at AAA, S&P cut the two giant US mortgage agencies Freddie Mac and Fannie Mae to AA+ to bring them into line with the sovereign.

S&P also turned its sights on other government-backed institutions, removing prime ratings from ten of the 12 US regional home lenders and five US insurers.

But it affirmed the UK was highly likely to retain its AAA rating if it stuck to its deficit plans.

S&P said Freddie and Fannie’s reliance on the US government since their 2008 bailouts was the reason for the cut.

“In addition to the implicit support we factor into our ratings, the US Treasury has demonstrated explicit support by providing these entities with capital quarterly, as necessary,” S&P said in a statement.

It also lowered to negative the outlook of a further five AA+ rated insurance groups, including Warren Buffett’s Berkshire Hathaway group, due to its high holdings of US government debt.

“The ten affected insurance groups... generally have significant holdings of US Treasury and agency securities. For the insurers with the most exposure, these investments constituted as much as 200 per cent of total adjusted capital at year-end 2010,” it said.

Foreign debtors fared no better, with Israel told that its $6bn US government loan guarantees had also been downgraded.