BofA: S&P May Downgrade US Again in November

Many more downgrades just happened a few minutes ago from Standard & Poor’s.
Fannie and Freddie have been downgraded.

Here’s some of their own release:

NEW YORK (Standard & Poor’s) Aug. 8, 2011–Standard & Poor’s Ratings Services
said today that it lowered its issuer credit ratings and related issue ratings
on 10 of 12 Federal Home Loan Banks (FHLBs) and the senior debt issued by the
FHLB System to ‘AA+’ from ‘AAA’.

We have also lowered the ratings on the
senior debt issued by the Federal Farm Credit Banks to ‘AA+’ from ‘AAA’.

The ratings on the individual farm member banks are not affected.

In addition, we have lowered the senior issue ratings on Fannie Mae and
Freddie Mac to ‘AA+’ from ‘AAA’.
The downgrades of Fannie Mae and Freddie Mac reflect their direct
reliance on the U.S. government. Fannie Mae and Freddie Mac were placed into
conservatorship in September 2008 and their ability to fund operations relies
heavily on the U.S. government.
In addition to the implicit support we factor
into our ratings, the U.S. Treasury has demonstrated explicit support by
providing these entities with capital quarterly, as necessary.

The downgrades of 10 of the 12 FHLBs and the FHLB System’s senior debt
reflect a one-notch reduction in the U.S. sovereign rating.
Before we
downgraded the U.S., under our GRE criteria, 10 of the 12 FHLB banks were
rated ‘AAA’, the same level as the U.S. sovereign because they have either
‘aa+’ or ‘aa’ stand-alone credit profiles and we classify them as having a
very high likelihood of receiving support from the government if needed.

The FHLBs of Chicago and Seattle were already rated ‘AA+’ prior to the U.S.
sovereign downgrade as they have lower stand-alone credit profiles (‘aa-‘ and
‘a+’, respectively) than the other 10 FHLBs. The FHLB System is classified as
being almost certain to receive government support if necessary under our GRE
criteria.
Thus, the FHLB System debt is rated at the same level as the U.S.
sovereign rating.
The implicit support that we factor into the issuer and
issue credit ratings relates to the important role the FHLBs and the FHLB
System play as primary liquidity providers to U.S. mortgage and housing-market
participants.

The downgrade of the senior debt issued by the Farm Credit System
reflects a one-notch reduction in the U.S. sovereign rating.
Under our GRE criteria, the Farm Credit System is classified as having a very high
likelihood of receiving support from the government if needed.
The Farm Credit System’s stand-alone credit profile is ‘aa’.
Thus, under our criteria, the notches of uplift that we factor into the ratings on debt issued by the
System decrease to one notch from two notches when the sovereign has a ‘AA+’
rating rather than a ‘AAA’ rating.
The issuer credit ratings on the four Farm
Credit System Banks that we rate are unaffected by the downgrade of the U.S.
sovereign given their ‘a+’ stand-alone credit ratings and high likelihood of
support classification under our GRE criteria.
The implicit government support
that we factor into our ratings for the Farm Credit System debt and the four
rated banks considers the system’s mission to provide stable and reliable
funding to the U.S. agricultural and rural sectors.

We have also lowered the ratings on 126 Federal Deposit Insurance
Corp.-guaranteed debt issues from 30 financial institutions under the
Temporary Liquidity Guarantee Program (TLGP), and four National Credit Union
Association-guaranteed debt issues from two corporate credit unions under the
Temporary Corporate Credit Union Guarantee Program (TCCUGP) to ‘AA+’ from
‘AAA’.
The downgrades on the TLGP and TCCUGP issues reflect their direct
credit support from the U.S. Treasury for timely and ultimate repayment.

The TLGP was formed to facilitate capital-markets borrowing for U.S.
banks and bank holding companies during the global credit crisis. Similarly,
the TCCUGP was formed to assist corporate credit unions that ran into
financial difficulties as a result of significant losses in their investment
portfolios.

Note what these all had in common that led directly to their downgrade?
They might not make it on their own, they might need government support.