This morning Standard & Poor’s announced that it was downgrading federal housing giants Fannie Mae and Freddie Mac. The two government housing agencies were the initiators of sub-prime mortgages. Both federal agencies were the prime movers of the housing collapse.
The S&P ruling is a follow-on of Friday’s downgrade of the U.S. sovereign debt from AAA to AA. Both Fannie Mae and Freddie Mac were downgraded to AA from AAA.
Under the Bush administration, there were unsuccessful efforts to reform both Fannie Mae and Freddie Mac. These efforts were thwarted by Democrats led by Rep. Barney Frank (D-MA) and former Senator Chris Dodd (D-CT).
Since the crash of the housing market, both Fannie and Freddie faced heavy declines and substantial government bailouts. In June 2010 Fannie Mae and Freddie Mac were de-listed from the New York Stock Exchange when its value fell to below $1 per share.
Since assuming office the Obama administration has continued one failed housing assistance program after another. It is now in its eighth homeowner’s assistance program to help those facing foreclosure. None have helped hard pressed home owners or resuscitate the depressed housing market.
Standard & Poor’s also is downgrading a host of other U.S. Government agencies as part of the general rating downgrade for the U.S. Government. These smaller federal agencies include the Depository Trust Co. National Securities Clearing Corp., Fixed Income Clearing Corp. and the Options Clearing Corp. All, including Fannie and Freddie were cut one notch to AA-plus. But the biggest downgrade was for Fannie and Freddie.