State leaders are tracking the effects of Standard & Poors recent downgrade of the U.S. governments credit status from AAA to AA+, but are not overly concerned about the near-term effects it might have.
Gov. Rick Scott said the S&P was justified in its decision because Congress and the Obama administration have failed to cut enough spending to significantly reduce the deficit.
In contrast to trying to be mad at a rating agency, when we all know that this country is spending more money than it should be spending -- its the wrong approach, Scott said.
Chief Financial Officer Jeff Atwater said before the downgrade that the State Board of Administrations handling of the state pension fund would not change significantly in the event of a downgrade, and he reiterated that position Tuesday.
Staying true to the policies that weve laid out, the allocations that weve laid out, that we know will have the best long-term benefit to Floridas participants in the system, we dont see changing based upon the downturn that took place in the stock market in the last week, Atwater said.
But the downgrade led S&P to reconsider the ratings of enterprises tied closely to federal government debt -- namely, government-backed mortgage giants Fannie Mae and Freddie Mac. Those government-sponsored enterprises (GSEs) were also reduced to AA+.
The downgrade could increase interest rates for Fannie Mae and Freddie Mac, which buy mortgages in the secondary market and sell them collectively to investors, increasing liquidity for banks and lenders to issue more home loans.
The ripple effect of the downgrade of the mortgage giants has the potential to impact Floridas already-dismal housing market. In 2010, Freddie Mac alone helped underwrite $13.2 billion in loans for more than 70,300 properties in Florida.
A report released Thursday by foreclosed property watcher RealtyTrac showed that foreclosures in the state were down 57 percent over the year, but the decline was mainly due to remaining delays related to stalled court cases resulting from the robo-signing controversy. Mortgages may still be in trouble, but foreclosure cases are taking longer to get through the courts, prolonging the timetable for recovery.
Unfortunately, the fall-off in foreclosures is not based on a robust recovery in the housing market but on short-term interventions and delays that will extend the current housing market woes into 2012 and beyond, said James Saccacio, CEO of RealtyTrac.
Both Atwater and Scott stressed the need for an economic recovery to stabilize the housing market. Scott also took a dig at Fannie Mae and Freddie Mac, which have become increasingly unpopular since a more than $300 billion federal bailout in 2008. Since then, the GSEs have continued to lose money, with Fannie Mae posting a loss of $2.9 billion in the second quarter, on top of the $6.5 billion loss it posted in the first quarter of the year.
The thing thats going to change our housing market is jobs. Its jobs, jobs, jobs. When we do the right things by keeping the taxes as low as possible, getting rid of regulations killing jobs, make sure we dont have lawsuits thats killing jobs. Ill be glad when we get to the 700,000 jobs -- when we get there, thats when were going to change the housing market, Scott said.
Reach Gray Rohrer at grohrer@sunshinestatenews.com or at (850) 727-0859.
