Agencies: Mulling The Unthinkable

March 2004
Investment Dealers' Digest;3/29/2004, Vol. 70 Issue 13, p13
Trade Publication
With legislation under discussion in the U.S. Congress that could, at least in theory, end the longstanding but controversial relationship between Federal National Mortgage Association (Fannie Mae)/Federal Home Loan Mortgage Corp. (Freddie Mac) and the U.S. government, some debt market players have begun thinking if AAA-rated Fannie and Freddie could possibly get a downgrade. So far, rating agencies have taken no actions to indicate they are worried about a decline in agency credit quality. Yet the potential for a colossal change in the relationship between the agencies and the government is reportedly embedded in new legislation, now being debated in the Senate Banking Committee, and some bankers wonder if what once seemed impossible could actually happen -"government-sponsored entities" Fannie and Freddie would be on their own.


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