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Three Major Banks Downgraded By
Moody's
September 25, 2011
Last Wednesday, Moody's, the leading rating agency in the financial industry downgraded Bank
of America, Citigroup and Wells Fargo. Bank of America and Wells Fargo received downgrades
on their long-term credit ratings, while Citigroup received a downgrade on its short-term credit
ratings.
One of the reasons given for the downgrades was that the Federal Government is less likely to
rescue the banks if they were to encounter difficulties again. In other word, "no company is too
big to fail.
All three banks were disappointed with the downgrades.
Bank of America maintains that the downgrade was based on issues external to the bank. "With
regard to the mortgage business, Moody's concludes that we have ample resources to absorb
the additional losses we are likely to experience on these exposures" Bank of America stated.
Citigroup completely disagreed with the downgrade. Citigroup is of the opinion that the
downgrade does not take into account the progress that Citigroup has made since the last rating
two-and-a-half years ago.
Wells Fargo released a statement on Thursday saying that its downgrade "solely reflects a
change in Moody's assumption regarding systemic support in light of the provisions of
Dodd-Frank."
The banks are still facing unknown billions of dollars in future litigation over the sale of bad loans
to investors. With this dark cloud still hanging over the banks, a downgrade was inevitable.
Moody's
September 25, 2011
Last Wednesday, Moody's, the leading rating agency in the financial industry downgraded Bank
of America, Citigroup and Wells Fargo. Bank of America and Wells Fargo received downgrades
on their long-term credit ratings, while Citigroup received a downgrade on its short-term credit
ratings.
One of the reasons given for the downgrades was that the Federal Government is less likely to
rescue the banks if they were to encounter difficulties again. In other word, "no company is too
big to fail.
All three banks were disappointed with the downgrades.
Bank of America maintains that the downgrade was based on issues external to the bank. "With
regard to the mortgage business, Moody's concludes that we have ample resources to absorb
the additional losses we are likely to experience on these exposures" Bank of America stated.
Citigroup completely disagreed with the downgrade. Citigroup is of the opinion that the
downgrade does not take into account the progress that Citigroup has made since the last rating
two-and-a-half years ago.
Wells Fargo released a statement on Thursday saying that its downgrade "solely reflects a
change in Moody's assumption regarding systemic support in light of the provisions of
Dodd-Frank."
The banks are still facing unknown billions of dollars in future litigation over the sale of bad loans
to investors. With this dark cloud still hanging over the banks, a downgrade was inevitable.