This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Moody's Sees 'Progress' on 'Too Big To Fail'

Stocks in this article: BACJPMGSC

NEW YORK ( TheStreet) -- Moody's Investors Service (MCO) completed ratings reviews of eight 'Too Big To Fail' U.S. banks on Thursday, stating creditors of the giant institutions should not expect the government to step in and shield them from losses, as happened in 2008.

Analysts at the credit ratings agency, which saw its own reputation take a beating during the crisis, cited "the ongoing progress of US bank regulators in developing an effective resolution framework for large, complex banks."

Specifically, Moody's analysts pointed to a feature of the 2010 Dodd Frank legislation known as the Orderly Liquidation Authority, which "would impose losses on US bank holding company creditors to recapitalize and preserve the operations of the group's systemically important subsidiaries in a stress scenario. As a result, the holding company creditors of systemically important US banks are unlikely to receive government support, signaling a higher risk of default. Our ratings on holding company debt therefore no longer benefit from 'lift' as a result of assumed government support," Moody's stated.

While the "Too Big To Fail" fix was the main reason for the review, the analysts nonetheless looked at individual factors for the different banks, issuing various upgrades and downgrades to different types of debt at the different institutions, leading to some surprising results.

Two of the banks that received the biggest official government bailouts following the 2008 crisis - Citigroup (C) and Bank of America (BAC) both benefitted from upgrades, while two banks widely believed to have come through the crisis with their balance sheets, if not their reputations, intact -- JPMorgan Chase (JPM) and Goldman Sachs (JPM) -- were downgraded. Despite those actions, the parent companies of both JPMorgan and Goldman remain higher-rated by Moody's than those of Bank of America or Citigroup.

In upgrading credit ratings for Bank of America's U.S. banking subsidiary, Moody's analysts cited "the bank's improved capital position, reduced tail risks, and declining expenses." It also praised Bank of America for reaching several legal settlements, while noting it remains exposed to additional legal risk and still needs to generate consistent earnings.

In an apparent allusion to the ouster of former CEO Vikram Pandit in favor of current chief Michael Corbat, Moody's praised Citigroup's efforts to install "a more conservative risk management culture and a more independent risk control function."

The other banks addressed in the report were Wells Fargo (WFC), Morgan Stanley (MS) BNY Mellon (BK) and State Street Corp. (STT).

-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,828.24 +0.49 0.00%
S&P 500 2,067.56 -5.27 -0.25%
NASDAQ 4,791.63 +4.3130 0.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs