Moody's: TARP Repayments Don't Change Bank Ratings

NEW YORK (AP) — The repayment of about $68 billion in bailout money by 10 large banks may seem like signs of financial strength, but Moody's Investors Services said late Wednesday it's not in the interest of creditors in the short term.

The ratings agency said "the repayments have the immediate effect of lowering capital levels and of shrinking liquidity positions at a time when economic and financial market conditions remain highly unsettled."

Moody's does not expect to lower the ratings of the 10 banks — among the largest in the country— who made repayments Wednesday. But downgrades may be down the road. If any of the 10, or other banks that repay funds received through the bailout program known as the Troubled Asset Relief Program, or TARP, fail to keep enough cash in reserve to absorb potential losses, Moody's said it may cut their ratings. ...