Fannie And Freddie Downgraded


The rating agency says that Washington has shown an inability to reach political consensus, which was highlighted by the debate on the debt ceiling, and this leaves the U.S. "less stable, less effective." S&P is one of the three major rating agencies that highlight investment risk, and is considered a golden standard among rating agencies.

However, all three agency's reputations were tarnished after mortgage-backed securities that they gave a AAA rating contributed to the economic collapse of 2007 and 2008. After S&P was pulled before Congress to testify about the faulty ratings, some now question the organization's reliability.

"Now they come in and they flex as if they've been this bastion of correctness when they've completely been wrong and so now everything they do is suspect in my view," said president of Ariel Investments Melody Hobson. Some wonder if S&P is rating the political system instead of the financial system.

While the White House pushed back against the downgrade, pointing out that the rating agency made a $2 trillion math mistake, White House spokesman Jay Carney conceded that reaching compromise on the debt ceiling debate took "too long and was at times too divisive."

"We must do better to make clear our nation's will, capacity and commitment to work together to tackle our major fiscal and economic challenges," Carney said in a statement.

Many experts are saying not to read into the ratings downgrade too much, pointing out that the other two major rating agencies still have the U.S. ranking at AAA and saying that the United States is still in a strong position.

Japan's Finance Minister Yoshihiko Noda maintains that the downgrade hasn't shaken his confidence in U.S. bonds, calling them "an attractive financial product" and told reporters that market trust in the dollar and U.S. Treasuries hasn't wavered.

Still, the downgrade has left many Americans concerned that the country is losing its footing as the global leader.

"We have to figure out though how we're going to play going forward and I think if don't get our house in order we're in danger of slipping in our ability to interact as a global player," said Gary Knell, a resident of New York.

The Associated Press and ABC News Radio contributed to this report.

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