S&P puts some ratings on Freddie Mac and Fannie Mae debt on CreditWatch Negative

Via Briefing.com (my emphasis added) ...

"S&P affirmed its 'AAA/A-1+' senior unsecured debt ratings on Fannie Mae (FNM) and Freddie Mac (FRE). At the same time, S&P placed our 'AA-' risk-to-the-government, subordinated debt, and preferred stock ratings on Freddie Mac, and our 'AA-' subordinated debt and preferred stock ratings, and 'A+' risk-to-the-government rating on Fannie Mae on CreditWatch Negative. "The affirmation of the senior unsecured debt ratings reflects the strong explicit and implicit support these government-sponsored enterprise securities hold in the marketplace." The most recent public demonstrations of government support by the U.S. Treasury underscore the key public policy role and the key liquidity role the congressional chartered GSEs have in the U.S. mortgage markets. This is reflected in the current stable outlook on the senior unsecured debt. The weak mortgage credit cycle driving credit losses higher at Fannie Mae and Freddie Mac has led to a crisis of confidence in the strength of their capital positions as the GSEs are facing higher demands for liquidity while their own core mortgage performance is weaker, and there is a higher degree of uncertainty regarding the broader market conditions. This is reflected in the weak pricing of their equity shares during the past few weeks ... Both firms face weak earnings due to rising credit expenses. The CreditWatch listing on the subordinated debt, preferred stock, and risk-to-the-government ratings underscores the expected higher stress on capital and earnings these firms face during the next several quarters. The confidence crisis in the equity markets is adding to the already stressed business cycle and creates additional challenges in the near term for capital-raising initiatives."

UPDATE: Bloomberg has a story that explains exactly what S&P did and why a little bit better.