....Big news in the financial world yesterday, as Moody’s downgraded three of America’s biggest commercial banks. The ratings agency hit Wells Fargo, Bank of America, and Citigroup, and the money-shot quote came from the Wall Street Journal:
Moody's downgraded Bank of America's long-term senior debt two steps to Baa1, which is three steps above a junk credit rating. The outlook on the new rating remains negative. The firm specifically noted that the downgrades didn't reflect a weakening in Bank of America's intrinsic credit quality.
The spin that’s being circulated on this is that Moody’s isn’t dissing the banks per se. Rather, Moody’s has just suddenly decided to become concerned that in the post Dodd-Frank world, the U.S. government would not bail out all of these banks, should they need to be bailed out. The WSJ is selling this as nothing more than the ratings agency deciding finally to apply an equal touch to all the troubled members of the Too Big To Fail club:
Moody's said the probability that the government would allow a large bank to fail is greater now than it was during the financial crisis ...The ratings for Bank of America, Wells Fargo, and Citi before Wednesday's downgrade reflected a greater level of government support than for five other systemically important financial companies--J.P. Morgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS), Morgan Stanley (MS), State Street Corp. (STT), and Bank of New York Mellon Corp. (BK) Now all eight companies are rated consistently with regard to possible government support.
But there’s no way this isn’t a serious blow to all these banks. You know you’re seriously fucked when even Moody’s, the most whorishly corrupt ratings company in modern history – one that “accidentally” gave billions in dicey derivatives AAA ratings a few years back (blaming the faux-bullish ratings on a computer error) – can’t find a way to avoid downgrading you.
And here’s my question today for folks keeping their money at Bank of America: How psyched are you today to have your bank downgraded to just above junk status even beforethe inevitable implosion of the Countrywide portfolio, that Yucca Mountain of deadly and still-severely-overmarked mortgages that BofA is toting along?
These three banks control, cumulatively, about a quarter of all America’s deposits. But it’s probably nothing to worry about, right? How about Ted Danson’s CSI debut? Man, is he having a quirky and idiosyncratic second career, or what?
There Will Be a Protest to Protest the Treatment of Occupy Wall Street Protesters
Occupy Wall Street is now in its 12th day. This morning brought another march on Wall Street. In other cities, similar efforts are springing up. And, there are now efforts to protest the treatment the protesters have gotten from the NYPD -- most dramatically and media-attention-getting, the pepper-spraying of several women who were being corralled by netting. We spoke to Alex Vitale, a CUNY professor who, with Penny Lewis, has organized a demonstration "against police attacks targeting Occupy Wall Street." The event is scheduled for Friday at 5:30 p.m., at One Police Plaza.
On September 24th, members of Occupy Wall Street marched to Union Square, and were subsequently met with extreme police violence, including violent arrests of non-violent protesters and pepper-spraying people in police custody.
(....) In fact, investment bankers by nature have huge appetites for risk, and most of them take pride in being able to sleep at night even when their bets are going the wrong way. If you’re not a person who can doze through a two-hour foot massage while your client (which might be your own bank) is losing ten thousand dollars a minute on some exotic trade you’ve cooked up, then you won’t make it on today’s Wall Street.
Nonetheless, thanks to the Gramm-Leach-Bliley Act passed in 1998 with the help of Bob Rubin, Larry Summers, Bill Clinton, Alan Greenspan, Phil Gramm and a host of other short-sighted politicians, we now have a situation where trillions in federally-insured commercial bank deposits have been wedded at the end of a shotgun to exactly such career investment bankers from places like Salomon Brothers (now part of Citi), Merrill Lynch (Bank of America), Bear Stearns (Chase), and so on.
These marriages have been a disaster. The influx of i-banking types into the once-boring worlds of commercial bank accounts, home mortgages, and consumer credit has helped turn every part of the financial universe into a casino. That’s why I can’t stand the term "rogue trader," which is always tossed out there when some investment-banker asshole loses a billion dollars betting with someone else’s money.
They’re not "rogue" for the simple reason that making insanely irresponsible decisions with other peoples’ money is exactly the job description of a lot of people on Wall Street. Hell, they don’t call these guys "rogue traders" when they make a billion dollars gambling.
The only thing that differentiates a "rogue" trader like Barings villain Nick Leeson from a Lloyd Blankfein, Dick Fuld, John Thain, or someone like AIG’s Joe Cassano, is that those other guys are more senior and their lunatic, catastrophic decisions were authorized (and yes, I know that Cassano wasn’t an investment banker, technically – but he was in financial services).
In the financial press you're called a "rogue trader" if you're some overperspired 28 year-old newbie who bypasses internal audits and quality control to make a disastrous trade that could sink the company. But if you're a well-groomed 60 year-old CEO who uses his authority to ignore quality control and internal audits in order to make disastrous trades that could sink the company, you get a bailout, a bonus, and heroic treatment in an Andrew Ross Sorkin book.
In other words, "rogue traders" are treated like bad accidents and condemned everywhere from the front pages to Ewan McGregor films. But rogue companies are protected at every level of the regulatory structure and continually empowered by dergulatory legislation giving them access to our bank accounts.
There is a movement in the UK for a thing called “ringfencing” that would separate investment bankers from commercial bankers....