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Moody's downgrades US banking: ‘rapidly deteriorating operating environment’
- advisedwang 4y agoAs usual, rating agencies successfully shut the barn door after the horse has bolted.
- BoorishBears 4y ago*after they kicked the horse out of the barn
- stametseater 4y agoThis recent trend of blaming the fires on the people who sounded alarms is really bizarre. The "bank runs" were caused by the banks being bad at their jobs, not by those who noticed it and said something. If Moody's has a share of the blame, it's because they said too little too late, not too much.
- BoorishBears 4y agoCritical thinking isn't a recent trend. With some critical thinking one can both blame the banks for misbehaving, but also see the irony in a rating agency's early warning of an impending downgrade being a partial catalyst in something a lot worse than a simple downgrade. An overly simplistic world view means dealing in absolutes that are generally not compatible with the concept of fractional banking (or really any complex system).
- esalman 4y agoMoody's threatened to downgrade SVB last week, before the bank scrambled to sell stocks. Their plan simply backfired.
- Red_Leaves_Flyy 4y agoWhy threaten when the period was already in the pudding? Are their decision makers drunk, incompetent, or bought and paid for? Missing this should be grounds to shut down or nationalize their ratings. The fact that this is outside the overton window is telling in and of itself.
- esalman 4y agoYeah probably Moody's didn't take SVB's exposure to Peter Thiel-funded startups into account.
- t3rabytes 4y agoAt some point you could argue that Moody’s is the reason for the deteriorating operating environment given that their downgrade of SVB is what caused the need for the asset sale which caused the run (following media/VC fund reports).
- watwut 4y agoThey did not exactly downgraded it with no reason, just for gun isn't it?
- newaccount2023 4y agosame Moody's that signed off on MBS?
- pc86 4y agoI wonder how many of the people in this thread bringing up the completely irrelevant and unrelated MBS stuff from 2008 would have had any idea what they were if movies like The Big Short or Margin Call hadn't been made.
- substation13 4y agoDoes it matter?
- lamontcg 4y agoI knew what MBS were before they blew up. CMBS issuance has also just about locked up this year, so don't bet it isn't still going to be relevant.
- kornhole 4y agoSVB and Signature bank suffered from a liquidity crisis rather than a solvency crisis. The fed has often stepped in to provide liquidity in such situations but instead here shut them down. This could be a trend to shut down smaller regional banks to force consolidation to larger banks. This is helped by these downgrades and other pundits triggering further liquidity crises. The big question is why this is happening and what is their outcome desired. Could it be paving the way for CBDC?
- kryogen1c 4y ago> SMB and Signature bank suffered from a liquidity crisis rather than a solvency crisis did you mean SVB? they were insolvent, not just illiquid.
- labster 4y agoInsolvent only in a technical sense; if you could have valued their government bonds at face value rather than market value, they had plenty of money.
- kryogen1c 4y ago> if you could have valued their government bonds at face value rather than market value, they had plenty of money that is not technical definition of insolvency. if you can cover your debts but need time to do so, thats the definition of being illiquid, not insolvent. my understanding of their books is that they could not cover their debts. the change in market conditions drove down their bond portfolio to the point of insolvency.
- carnitine 4y agoUnder your definition they can just hold the bonds to maturity to be solvent.
- itsoktocry 4y ago
- dpkirchner 4y agoIt's really hard to take Moody's seriously following their ratings for garbage MBSs. https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the_subprime_crisis#Competitive_pressure_to_lower_standards https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the... Just a complete garbage company that is rotten to the core. Hell, its president is still the same person that was in charge before and during the recession caused, in large part, by his choices.
- janalsncm 4y agoThere’s definitely an unholy relationship between banks, rating agencies, and regulators. Just like Art appraisers, agreeable ones eat a lot better than skeptical ones. But it also reminds me of the joke: if the Pope tells you he believes in God that just means he’s doing his job. If he tells you he’s beginning to have doubts, maybe he’s onto something.
- unzadunza 4y agoI just realized it’s really easy to upvote a comment accidentally while scrolling on my phone with my left thumb (I’m a lefty). But what the heck, I like that joke.
- mikestew 4y agoYou should have been here before the "unvote/undown" links (which, BTW, might be what you're looking for: it's on the same line as the comment header). "Apologies for the downvote, on mobile", "why isn't there undo for votes?", etc. A lot like discussions when a paywalled article comes up. :-)
- gowld 4y agoIn US Law (Hearsay doctrine) that's called "admission against interest". Demonstrably self-harming statements are presumed to be honest. (The ways this can be abused by liars are interesting. Example: a parent confessing to a crime their child committed.)
- 6stringmerc 4y ago
- user3939382 4y agoHave executives at Moody’s gone to jail yet for destroying our economy by colluding with investment banks in rating junk MBS as AAA?
- 6stringmerc 4y agoI for one am glad the US banking system roped in the Germans and brought the entire global system down too just so we didn't have to eat our own shit alone.
- itsoktocry 4y ago>Have executives at Moody’s gone to jail yet Per Hanlon, you're mistaking stupidity for malice. It's hard to prove Moody's knowingly rated "junk" as AAA, versus not knowing how to rate the instruments at all.
- mrguyorama 4y agoWhen it's your literal job to not be ignorant, ignorance IS malice.
- jjeaff 4y agoSeems like it wouldn't be that hard to prove malice considering several people, with data, were sounding the alarm to the rating agencies.
- e_i_pi_2 4y agoYou don't need malice to go to jail - ignorance is more than enough, especially if it's in a financial/legal/medical context
- MuffinFlavored 4y agoCould one argue this is a slightly coordinated play to pressure the Federal Reserve to stop hiking interest rates/stop keeping them "high" (higher than 0.25%, which they used to be) so corporations (shareholders) can go back to debt fueled by all-time-cheap debt again? The average person will interpret this and say "wow, the Federal Reserve is going to break the U.S. banking system if they keep interest rates too high!"
- chippiewill 4y agoYou could argue that, you'd be wrong, but you could.
- addisonl 4y agoReally compelling argument you've got!
- nickff 4y agoWhy would the Board of Governors at the Federal Reserve care about corporate shareholders? Their main constituency is the banks, especially those that sit on the boards of the regional Feds. Those banks benefited from quantitative easing, and similar policies, as it allowed them to originate a lot of loans and make a lot of money. Raising interest rates is very bad for investment banks. That said, I don't think there is any sort of complex plan. They're not as clever as you give them credit for, and it seems like things have spiraled out of control.
- taylodl 4y agoIf that's the case then the Board of Governors would want to preserve their constituent banks and keep interest rates at current levels and not raise them, right? If they were to do that would they be doing the right thing?
- nickff 4y agoIf they really cared about their constituent banks, they wouldn't have raised interest rates at all. This all depends on how seriously you think they take the inflation mandate, versus how much they care about their constituent banks and other political pressures. I happen to think that they really do care about inflation, as they know it is what will matter in the history books. I think that the Governors underestimated the long-term impact of extremely low rates, and how they would magnify the impact of increased rates on (commercial and investment) bank balance sheets. They love historical analogies, and there isn't one for this (yet).
- nailer 4y agoModdy's had SVB as A1 last week: https://www.reuters.com/markets/us/moodys-downgrades-credit-ratings-silicon-valley-bank-svb-financial-2023-03-11/ https://www.reuters.com/markets/us/moodys-downgrades-credit-...
- LatteLazy 4y agoIt's honestly amazing to me that rating agencies still exist...
- andy_ppp 4y agoWhere is the run on the actual banks or are people trying to cause one to make a bunch of money?
- slt2021 4y agobank run is silent. The fact you don't hear about doesn't mean its not happening. Retail (regular persons) are insured since almost everyone has <250k per account. They have no reason to change banks, that's why you don't hear anything. Small/medium/large businesses however are changing their treasury options right now as we speak, and run from regional banks towards big systemically important banks (top4 basically)
- andy_ppp 4y agoWhy? Everyone from SVB is going to be fine, they can withdraw their funds. It is not a good situation if the US ends up with 3-4 banks, this is why the guarantee is there from government.
- slt2021 4y agoI agree that it is bad if only 4 banks are left, but companies dont want to risk with their cash if something goes wrong with their bank. There is zero downside in changing bank from small -> big4, only upside
- mrguyorama 4y agoIt's always CNBC trying to sell some fraud or scam or bullshit opinion. The single worst financial news group I think I've ever seen. Every second article of theirs is about how some trust fund kid utilized their nepotism to make $400k this year "And you can too" or such bullshit. What other banks have half their deposits in 10 year lockup with zero hedging and an extremely undiverse group of depositors that will all act in lockstep?
- deleted 4y ago[deleted]
- Scubabear68 4y agoToo bad they didn’t do this at least six months ago. The federal government really needs to take a hard look at the ratings agencies.