S&P swings ax as ratings cuts come fast and furious

Credit ratings agency follows its downgrade of US long-term sovereign credit rating with a host of additional downgrades.
AUG 09, 2011
As a result of Standard & Poor's downgrade of the long-term sovereign credit rating of the U.S., the ratings agency is following up with a host of further downgrades today. Most involve a lowering of credit ratings to double A+ from triple A. As of this afternoon, 10 of the 12 Federal Home Loan Banks have been cut, together with the senior debt issued by the FHLB system and the senior debt issued by the Federal Farm Credit Banks, as well as the senior issue ratings on Fannie Mae and Freddie Mac. In addition, Standard and Poor's cut ratings on 126 Federal Deposit Insurance Corp.-guaranteed debt issues from 30 financial institutions sold under the Temporary Liquidity Guarantee Program and four debt issues guaranteed under the Temporary Corporate Credit Union Guarantee Program. U.S.-guaranteed bonds issued by Israel also were downgraded. The corporate credit ratings of the Army and Air Force Exchange Service, the Navy Exchange Service Command and the Marine Corp. Community Services were lowered to double A- from double A. The organizations run merchandising businesses for military personnel. Also getting hit were The Depository Trust Co., National Securities Clearing Corp. the Fixed Income Clearing Corp., and the Options Clearing Corp., all going to double A+ from triple A. Standard & Poor's has concerns that falling securities prices could increase margin calls, decrease capital and collateral, and harm clearinghouse members' ability to pay. Five U.S. insurance companies suffered the same fate. The long-term counterparty credit and financial strength ratings on the member companies of the Knights of Columbus, New York Life Insurance Co., The Northwestern Mutual Life Insurance Co., the Teachers Insurance and Annuity Association of America and United Services Automobile Assocation were cut to double A+, based on their large holdings of Treasury bonds. Standard & Poor's lowered the ratings on approximately $17 billion of securities issued by New York Life, Northwestern Mutual, TIAA and USAA. Five industrial revenue bonds were also cut today. At the same time, the ratings agency cut the credit outlooks on insurers Assured Guaranty Ltd., Berkshire Hathaway Life Insurance Co., Guardian Insurance and Annuity Co., the Massachusetts Mutual Life Insurance Co. and Western & Southern Financial Group, from stable to negative. More downgrades could be coming. Last month, Standard and Poor's put many of the entities that it cut today on credit watch lists. But many more borrowers were also put on watch lists last month, including: • Almost 3,000 pre-refunded municipal bonds. • 206 investment funds in the U.S., Europe and Bermuda, due to exposure to U.S. Treasury and U.S. government agency securities. • 604 structured finance transactions worth $373.7 billion. • A range of municipal housing issues backed by the U.S. • Eight federal leases. • The Tennessee Valley Authority. • The Bonneville Power Administration.

Latest News

Northern Trust names new West Region president for wealth
Northern Trust names new West Region president for wealth

The new regional leader brings nearly 25 years of experience as the firm seeks to tap a complex and evolving market.

Capital Group extends retirement plan services further with a focus on advisors
Capital Group extends retirement plan services further with a focus on advisors

The latest updates to its recordkeeping platform, including a solution originally developed for one large 20,000-advisor client, take aim at the small to medium-sized business space.

Why RIAs are the next growth frontier for annuities
Why RIAs are the next growth frontier for annuities

David Lau, founder and CEO of DPL Financial Partners, explains how the RIA boom and product innovation has fueled a slow-burn growth story in annuities.

Supreme Court slaps down challenge to IRS summons for Coinbase user data
Supreme Court slaps down challenge to IRS summons for Coinbase user data

Crypto investor argues the federal agency's probe, upheld by a federal appeals court, would "strip millions of Americans of meaningful privacy protections."

Houston-based RIA Americana Partners adds $1B+ with former Morgan Stanley director
Houston-based RIA Americana Partners adds $1B+ with former Morgan Stanley director

Meanwhile in Chicago, the wirehouse also lost another $454 million team as a group of defectors moved to Wells Fargo.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.