S&P Follows Up Its US Outlook Warning With A Comparable One For The GSEs And The FHLB System

Tyler Durden's picture

From S&P, which does the logical follow up to its earlier US outlook warning, and revises its GSE and FHLB outlook to negative.

NEW YORK (Standard & Poor's) April 20, 2011--Standard & Poor's Ratings  Services said today that it revised its outlooks on the debt issues of Fannie Mae, Freddie Mac, the Federal Home Loan Bank System, and the Farm Credit System Banks to negative from stable while affirming our respective debt issue ratings.

We also revised our outlook to negative from stable for 10 of the 12 individual Federal Home Loan Banks while affirming their 'AAA' long-term counterparty credit ratings. 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. These changes reflect our revision of the outlook on the United States of America to negative from stable (AAA/Negative/A-1+; please see  United States of America ‘AAA/A-1+’ Rating Affirmed; Outlook Revised To Negative, published April 18, 2011, on RatingsDirect for further details).

Per our government-related entity (GRE) criteria, the ratings on the GREs noted above are constrained by the long-term sovereign rating on the U.S. 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. We also factor direct and indirect sovereign risks, such as the impact of macroeconomic volatility, currency devaluation, asset impairment, or investment portfolio deterioration, into our stand-alone credit profile ratings.

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. Conversely, if we were to lower the ratings on the U.S., we would also likely lower the ratings on the debt of these GREs as well as our issuer credit ratings on relevant individual GRE entities.

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Cognitive Dissonance's picture

Ouch. That's gonna leave a mark......not.

Just look at the S&P 500 today. No one can convince me they don't want the dollar flushed to save the wealth effect. At least for now.

alien-IQ's picture

What? a 200 point gap up and then flat for 7 hours...suspicious? Nooooooooooo!!!! It's like...totally natural dude.

SheepDog-One's picture

Right, typical 180 open gap up where it hovers in a few dollar range all day. Nothing synthetic about any of this.

alien-IQ's picture

and dare we even mention the volume on SPY? surely something this abysmal is justification for a nearly 200 point gain right?

This is all making me a little ill...

SheepDog-One's picture

Meanwhile stocks after hours are flying up 5%. Truely bizarro world, makes the dotcom bubble look completely sane.

A Man without Qualities's picture

I don't think it's that they want the Dollar flushed, I just think they're out of alternative ways to preserve the Ponzi.  The idea the Fed has been selling equity index puts is strongly supported by their clear abject fear of anything like a correction...

SheepDog-One's picture

We'll be seeing the DOW race up daily while the dollar plunges into 60's, effectively defaulted but whats that matter, stocks are up and THATS all that matters!

Cognitive Dissonance's picture

You're talking semantics here. If the only way to goose the market is to flush the dollar then they want the dollar flushed. If there were another way, that would be what they want.

When you must or want to have something everything else is dictated by that want or need. Sure they want several options to select from. They don't have several. Doesn't seem to stop them, does it?

A Man without Qualities's picture

When Rome ran out of silver, it chose to increase the amount of lead in the coins rather than not pay their soldiers.  I am sure they knew the risk they ran but it delayed the point at which the army mutinied.  However eventually the barbarians decided they no longer were willing to be paid off in debased coinage, so marched on Rome to get the good stuff and the army was not willing to defend those people who had cheated on them for so long.

I suspect things will play out the same this time...

alien-IQ's picture

I guess that should send the DOW well past 14,000 judging by the impact the last "warning" had. This will surely send the $DXY below the 74.26 support level.

I remain in awe of this ponzi...it's simply mind- boggling.

thedrickster's picture

"I remain in awe of this ponzi...it's simply mind- boggling."

I am suffering from debilitating cognitive dissonance. Must.....buy.....Es.

centerline's picture

back away from the terminal man.  just back away slowly.

SheepDog-One's picture

Just remember the ETrade baby, when YOU buy it is probably when it all plunges straight down in minutes. I actually believe in this market if 1 actual live retail stepped in and bought something, Wall St would go all Fukushima in seconds.

thedrickster's picture

"I actually believe in this market if 1 actual live retail stepped in and bought something, Wall St would go all Fukushima in seconds."

That is the funniest (in a gallows sort of way) fucking thing I have read in many days.


bob_dabolina's picture

Bro, no way, let's hit the back nine and shoot some hoops instead. We can talk this over at the Willow Smith concert at my crib. This is a simple mistake, you just underestimated the innovation of our bureaucracy.


plocequ1's picture

Too late. Retard mode in full progress.. Apple in 10 minutes.

slaughterer's picture

S&P avoided GSE topic in conference.  Now they turn on the blast faucet.  But wasn't this obvious?

Urban Redneck's picture

Wasn't the sub-prime meltdown obvious? (this is S&P we're talking about)

long juan silver's picture

Reat Bastids! Why cant they just leave us alone?

astartes09's picture

BTFD til the end.

ml8ml8's picture

Only makes sense that the guaranteed party gets downgraded after the guarantor is downgraded.

SWRichmond's picture

Spending a lot of time munching and spectating lately.  Time for the giant economy size:




RobD's picture

You can do 300lbs of yellow popcorn for the price of two of those. Ends up being 9 5gal pails or one 55gal drum. But if you arn't a do it yourself kind of guy that would be the way to go.

Sudden Debt's picture

Fannie & Freddy... they should make a movie about those 2 companies.

Didn't it all start with those 2 fuckers?



comming to a theatre near you this summer!!


Misean's picture

Man, those bureaucracies are stuffed to the gills with high quality papaer, where's the love?

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alien-IQ's picture

and just like that...the /ES hits a new HOD of 1330....amazing...simply...amazing...

SheepDog-One's picture

Look at the pandemonium over at Yahoo finance on some of these tech stocks right now, QCOM up 5% after hours, Apple up $5 after hours and hasnt reported yet....this is all like some insane carnival on bad acid.

alien-IQ's picture

and let's not forget the sheer idiocy of the DOW now being up 100 point from where it was BEFORE the S/P warning.

This is fuckin insane man.

SheepDog-One's picture

And still, no one at all involved has been arrested, or even charged with anything. Ben just shifts printing presses into 6th gear and floors it.

Silver Bug's picture

I can't believe they are defying their puppet masters like this. Things must be even worse than we think behind the scenes.



alien-IQ's picture

it's just a ploy to confuse the pleabs. STFU and BTFD.

Mercury's picture

It seems ridiculous to think that the USA (or it's direct entities or even arm's-length agencies) would ever technically default since they can (and are obviously cool with) simply printing more money (or some such jazz that amounts to the same thing).  Those principal and coupon payments may be in near-worthless $US but that still doesn't a default make.

That said, why have countries like Russia defaulted if they could have just printed more of their own currency too?   Do they simply reach a point where they'd rather stiff debt holders than devalue their currency?

alien-IQ's picture

let's pretend that you are a landlord. I rent a place from you for $1000 per month. At the end of the month I deliver to you 1000 pounds of shit...technically...did I default?

Argonaught's picture

This works for devaluing existing debt.  But do you think you can sell new debt while doing this to existing holders?  It turns out, in reality, yes...until you can't.  Then you eat the shitburger and default.  

bingaling's picture

It is argued that the FED is the only buyer of debt now . Read Whipsaw Wednesday by ilene. Look at the chart after the video showing the price of gold in Marks - then look at the price a year later etc. Scary shit .

Hedgetard55's picture

AAA toilet paper, a unique concept.

the not so mighty maximiza's picture

S&P will soon be classified as a terrorist organization.

digalert's picture

Shhh, my government says we don't talk about fanny or freddy.

SwingForce's picture

The GSEs need attention, they have been buying rotten mortgages and saying they are "performing". I stopped paying Suntrust in March 2008 and on Dec 30, 2008 they sold my mortgage to FNMA. This is while in the possession of $4.85 BILLION from TARP. Why use Tarp funds when you can sweep everything under the rug to a GSE?  They can lie even better than a publicly traded company. The American Taxpayer is being fucked so many ways that he doesn't even know about yet, but the real question is who will repay ALL THIS DEBT?

SwingForce's picture

Tyler, you are often accused in MSM as being overly sceptical and sarcastic. I say not enough so, often you need to revise your opinion further outboard. You are Right On! Keep it up!

Rainman's picture

Skepticism is a blessing from nature. Sarcasm requires true talent and practice, practice...

sudzee's picture

Is this System Reset Weekend? Dollar about to go off a cliff, gold and silver relentless increases, us housing still headed lower, inflation smacking everyone worldwide who makes less than goldmanites, giddy stockmarket not able to get above inflation adjusted high of a few years back, 4 day weekend , LMBA closed monday, pm roll tuesday, china no longer willing to finance the budget deficit. The shit just goes on and on.

Four days should be enough to reset everything. I'm really interested in seeing where everything digital or paper finishes tomorrow. 


thedrickster's picture

Granted I have certain proclivities toward apocalypse but I can't help wonder the same.