Fitch Ratings on Tuesday downgraded Fannie Mae and Freddie Mac's preferred shares, while noting that the capital levels at both "remains adequate for the intermediate term." Fitch downgraded Fannie's preferred to BBB- from A+. Freddie was downgraded to BBB- from A. In a statement Fitch writes that the "lack of reliable access to the public equity markets appears to be more permanent" than it had anticipated, adding that the GSEs' "ability to access equity markets may need to be precipitated or replaced by more tangible forms of government support." Fitch does not expect either company to be profitable this year or next. It cites Fannie and Freddie's large holdings of subprime and alt-A assets as a chief reason for its concerns.
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