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""Standard & Poor's"":http://www.standardandpoors.com has lowered its outlook from stable to negative on the debt issues of ""Fannie Mae"":http://www.fanniemae.com and ""Freddie Mac"":http://www.freddiemac.com, as well as the ""Federal Home Loan Bank System"":http://www.fhlbanks.com/, and the ""Farm Credit System Banks"":http://www.farmcreditnetwork.com/.
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The move follows the ratings agency's outlook revision on the United States earlier this week, also slipping from stable to negative. S&P says the latest downgrades on the other four entities are because of their ties to the U.S. government.
""Per our government-related entity (GRE) criteria, the ratings on the GREs…are constrained by the long-term sovereign rating on the U.S.,"" S&P said. ""We derive our opinion of the support included in the ratings based on the links and roles attached to the supporting entity, the U.S. government.""
[COLUMN_BREAK]The agency noted that it also factors direct and indirect risks, such as the impact of macroeconomic volatility, currency devaluation, asset impairment, or investment portfolio deterioration.
""We will not raise our outlooks and ratings on these entities above those on the U.S. government as long as the ratings and outlook on the U.S. remain unchanged,"" S&P said, adding that if the ratings on the U.S. were to be lowered, the ratings on the debt of Fannie, Freddie, the Federal Home Loan Bank System, and the Farm Credit System Banks would follow suit.
S&P says it's also revised the outlook to negative from stable for 10 of the 12 individual Federal Home Loan Banks. The outlooks on the Federal Home Loan Banks in Chicago and Seattle were not affected, nor were the ratings on the individual Farm Credit banks.
In downgrading its outlook for the U.S. earlier this week, S&P noted that the government's outlays to Fannie and Freddie ""were part of the risk"":http://dsnews.comarticles/sp-cites-fannie-and-freddie-as-grounds-for-negative-outlook-on-us-2011-04-18 factored in.
S&P estimates that the government might have to inject another $130 billion into the two mortgage giants to cover their losses, in addition to the $148 billion in taxpayer money they've already received.
That figure could go as high as $685 billion, however, if the government opts to capitalize Fannie and Freddie on a commercial basis, according to S&P.
