S&P Downgrades Depository and Clearing House Institutions

Standard & Poor’s has now reduced the credit ratings for some of the pillars of the U.S. financial system -- the Depository Trust Co,. National Securities Clearing Corp., Fixed Income Clearing Corp. and the Options Clearing Corp. – by one notch to AA-plus from AAA.

These institutions process trades and are key to the daily operation of the U.S. financial markets.

S&P said in a statement Monday the downgrades resulted from its review of various entities that are financially dependent on the federal government.

The ratings agency said its downgrade of federal debt, announced Friday, "constrains" the depository and clearinghouses because "their respective businesses and the assets they hold are concentrated in the domestic market."

"We have not changed our view of the fundamental soundness of their depository or clearing operations," S&P added, but it gave them negative outlooks.

The downgrades follow the ratings agency's lowering of the credit rating of the U.S. government on Friday, and of Fannie Mae and Freddie Mac on Monday, two government-sponsored enterprises that dominate the U.S. residential mortgage market.

Ratings for The Federal Home Loan Banks were also cut to AA-plus from AAA.

S&P also cut its senior debt rating for the Federal Farm Credit Banks to AA+ from AAA.

In addition, S&P reduced its rating "on 126 Federal Deposit Insurance Corp.-guaranteed debt issues from 30 financial institutions under the Temporary Liquidity Guarantee Program," as well as four "National Credit Union Association-guaranteed debt issues."