On September 19th, the US government announced a set of extraordinary
proposals, including the creation of a $700 billion troubled asset relief program and
multiple additional measures to support the short-term credit market. These
proposals followed closely on a number of other significant market interventions
that were implemented over the preceding two weeks.
As of the date of this Special Comment’s publication, the scope and the specific
details of the Government’s proposal have not yet been finalized. Notwithstanding
the fluid nature of the situation, in this Special Comment we attempt to discuss the
potential rating implications of these actions as best we understand them. We
begin with a summary of what we currently know about these measures, their
likely impact, and their remaining critical uncertainties. We then review the
potential rating implications by sector, covering:
􀂄 Banks and securities firms
􀂄 Financial guarantors
􀂄 Money market funds
􀂄 Structure finance securities
􀂄 Non-financial corporates
􀂄 US public finance issuers
􀂄 US federal government
It should be noted that our conclusions about the rating implications for the
different sectors are clearly quite tentative. We anticipate learning much more in
the coming days as the Congress works to produce the legislative text and the
government's subsequent work to implement the measures. Moreover, we intend
to dialogue closely with the banks, securities firms, and bond insurers to learn how
they intend to use the program and various benefits they believe they will derive.