Big news in the financial world yesterday, as Moody’s downgraded three of America’s biggest commercial banks. The ratings agency hit Wells Fargo, Bank of America, and Citigroup, and the money-shot quote came from the Wall Street Journal:
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Moody's downgraded Bank of America's long-term senior debt two steps to Baa1, which is three steps above a junk credit rating. The outlook on the new rating remains negative. The firm specifically noted that the downgrades didn't reflect a weakening in Bank of America's intrinsic credit quality.
The spin that’s being circulated on this is that Moody’s isn’t dissing the banks per se. Rather, Moody’s has just suddenly decided to become concerned that in the post Dodd-Frank world, the U.S. government would not bail out all of these banks, should they need to be bailed out. The WSJ is selling this as nothing more than the ratings agency deciding finally to apply an equal touch to all the troubled members of the Too Big To Fail club:
Moody's said the probability that the government would allow a large bank to fail is greater now than it was during the financial crisis ...
The ratings for Bank of America, Wells Fargo, and Citi before Wednesday's downgrade reflected a greater level of government support than for five other systemically important financial companies--J.P. Morgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS), Morgan Stanley (MS), State Street Corp. (STT), and Bank of New York Mellon Corp. (BK) Now all eight companies are rated consistently with regard to possible government support.
But there’s no way this isn’t a serious blow to all these banks. You know you’re seriously fucked when even Moody’s, the most whorishly corrupt ratings company in modern history – one that “accidentally” gave billions in dicey derivatives AAA ratings a few years back (blaming the faux-bullish ratings on a computer error) – can’t find a way to avoid downgrading you.
And here’s my question today for folks keeping their money at Bank of America: How psyched are you today to have your bank downgraded to just above junk status even before the inevitable implosion of the Countrywide portfolio, that Yucca Mountain of deadly and still-severely-overmarked mortgages that BofA is toting along?
These three banks control, cumulatively, about a quarter of all America’s deposits. But it’s probably nothing to worry about, right? How about Ted Danson’s CSI debut? Man, is he having a quirky and idiosyncratic second career, or what?