Thursday, June 2, 2011

Moody's Threatens Downgrade of Bank of America, Citi and Wells fargo

They just announced a possible downgrade of Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. as the U.S. government may limit support of the largest financial firms. The review will “focus on whether these ratings should be adjusted to remove this unusual uplift and include only pre-crisis levels of government support.”

Moody’s Senior Vice President Sean Jones says “‘The U.S. government’s intent under Dodd-Frank is very clear,” said “It does not want to bail out even large, systemically important banking groups.”
Moody’s assessments “... may temper the extent of any ratings downgrades that could result from its review of these firms’ unusual level of systemic support,”.

Still, Bank of America and New York-based Citigroup “have sizable residential mortgage exposures,” “Their credit costs could therefore spike if the U.S. economy were to contract again. Further, they continue to face litigation costs related to faulty foreclosure practices.”

As for Bank of New York Mellon, it had the outlook on its debt lowered to negative from stable.

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