This Day On The Street
Continue to site
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

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

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 - Get Report) 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 - Get Report) and Goldman Sachs (JPM - Get Report) -- 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.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $14.56 0.00%
JPM $63.20 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs