The downgrade will likely affect state and municipal government directly supported by federal aid and credits that rely on federal support revenues for part of total budget.
Top 20 recipient states of federal dollars
John Hallacy, municipal research strategist at Merrill Lynch said:
Municipals in the U.S.A. have never had to consider a sovereign ceiling before. Most rating agencies have not suggested that state and local ratings will be lowered in lock-step.
However, Moody's identified five states including Maryland, Virginia, Tennessee, New Mexico, and South Carolina that they would downgrade along with a sovereign downgrade."
According to Merrill Lynch, states in the South and West could be more affected due to concentrations of military and defense operations.
Rightardia has pointed out that the Red states in the South and West are the biggest beneficiaries of the federal largess. Yet, some of the most vociferous talking head opponents of the "welfare state" live in the same states.
The Red States curiously are conservative hot beds. Perhaps that will change once the credit crunch hits these states.
source: http://www.ibtimes.com/articles/196919/20110812/fannie-mae-downgrade-debt.htm
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