The ripple effects of Standard & Poor's unprecedented downgrade of U.S. debt spread through the financial system on Monday with some of the nation's biggest life insurers, securities clearinghouses and investment funds losing their triple-A ratings, according to the Wall St Journal.
Fannie Mae and Freddie Mac, the government-controlled mortgage-finance giants, were also downgraded as large swathes of the financial world adjusted to a new era in which the U.S. no longer commands the highest rating from all the major ratings firms.
The widely anticipated downgrades—one notch down to double-A-plus with a negative outlook for many of the affected entities—were a direct result of S&P's cut of the U.S. sovereign-debt rating on Friday. Last month, S&P had put scores of companies and funds on negative watch, signaling the threat of a future downgrade, after applying that view to the U.S.; under S&P's criteria, a nation's rating constrains the financial-strength ratings on insurers and some other entities.
The downgrades sting the pride of these companies and the investment funds, but…
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