Moody's Cuts Ratings of J.P. Morgan, Goldman Sachs and Other Big Banks

Banking, finance, and taxes

Published: November 15, 2013 7:25 am

Four of the largest U.S. banks saw their ratings from Moody’s Investors Service cut on Thursday. The agency cited the reduced likelihood that the government would help Bank of New York Mellon Corp. (NYSE: BK), Goldman Sachs Group Inc. (NYSE: GS), J.P. Morgan Chase & Co. (NYSE: JPM) and Morgan Stanley (NYSE: MS) repay creditors in a crisis, as a result of the Dodd-Frank banking reforms.

Moody’s began a review of eight U.S. financial institutions back in August, and that review has now concluded. The agency’s ratings of Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C), State Street Corp. (NYSE: STT) and Wells Fargo & Co. (NYSE: WFC) were reaffirmed.

The senior holding company ratings of those institutions that saw a downgrade were lowered just one level: to A1 from Aa3 for Bank of New York, to Baa1 from A3 for Goldman Sachs, to A3 from A2 for J.P. Morgan and to Baa2 from Baa1 for Morgan Stanley.

The statement from Moody’s said:

We believe that U.S. bank regulators have made substantive progress in establishing a credible framework to resolve a large, failing bank. … Rather than relying on public funds to bail out one of these institutions, we expect that bank holding company creditors will be bailed-in and thereby shoulder much of the burden to help recapitalize a failing bank.

Rival ratings agency Standard & Poor’s took a similar stance back in June, indicating that it had become “increasingly clear” that the federal government might not rescue a failing bank in a crisis.

Shares of Goldman Sachs, J.P. Morgan and Morgan Stanley were all inactive in premarket trading Friday. Shares of Bank of America were up fractionally in early trading, but Citigroup and Wells Fargo shares were inactive as well.

Are You Still Paying With a Debit Card?

The average American spends $17,274 on debit cards a year, and it’s a HUGE mistake. First, debit cards don’t have the same fraud protections as credit cards. Once your money is gone, it’s gone. But more importantly you can actually get something back from this spending every time you swipe.

Issuers are handing out wild bonuses right now. With some you can earn up to 5% back on every purchase. That’s like getting a 5% discount on everything you buy!

Our top pick is kind of hard to imagine. Not only does it pay up to 5% back, it also includes a $200 cash back reward in the first six months, a 0% intro APR, and…. $0 annual fee. It’s quite literally free money for any one that uses a card regularly. Click here to learn more!

Flywheel Publishing has partnered with CardRatings to provide coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.