Moody's To Examine "Government Related Issuers"
The credit rating firms Moody's and Fitch have had a vague stance regarding the likelyhood that Fannie Mae or Freddie Mac will be bailed out by the US government. "Senior debt ratings...include an assumption of support from the US government that would be provided in the event of severe financial stress".
"If there was a major problem in their ability to issue debt, then the government would have to step in in order to support not just the GSEs but the overall economy as well," Fitch said at the time.
Yesterday, Moody's undertook an effort to formalize the matter and that's a good thing, considering the worlds economy hangs in the balance. "Moody's Investors Service announced today that it plans to examine ratings on various government related issuers (GRIs) by midyear."
"'The Application of Joint Default Analysis to Government Related Issuers,' The guidelines represent an elaboration and systematization of the rating agency's prior approach to rating issuers with full or partial government support. They take explicit account of each GRI's baseline default risk assessment, the supporting government's default risk, an estimate of default dependence between the two entities and the estimated probability of government support."
The list of organizations at the bottom, under US, includes:
Federal National Mortgage Association
Federal Farm Credit Banks
All of the Federal Home Loan Banks
Federal Home Loan Mortgage Corporation
Resolution Funding Corporation..This is what's left of the RTC.