Moody's downgrades US banking: ‘rapidly deteriorating operating environment’

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.

They have done good work in certain fields and are not the only game in town. Are the other agencies any better? My experience is a big phat NOPE same porn-set-relationship-odor in the business for my taste. There are minors in munis that stick to being legit, but ratings are ephemeral the moment they're published anyway.

Funny you don't mention AIG and how nobody there went to jail. I even know of one guy who back-dated securities to help out a buddy. Using taxpayer money. The industry is rife for a 70% pay haircut so real people can do real work in the real world. Finance itself shouldn't be an industry, it's a service.

It's hard for me to take anything seriously which is why I prefer the barter system and being an outlaw from society and only dropping in when I need. All of this is a sad, broken joke with no viable paths upward. Not yet at least.

Seriously. How can I compare Fitch, S&P and Moody's? Is there any way an outsider can disrupt their triopoly?

all joking aside, these sorts of watermarks regardless of their altruistic authenticity or perfection were routinely downplayed and ignored during the 2008 collapse. the Bush administration for all its best efforts literally devolved into a propaganda instrument with daily or weekly updates amounting to little more than wishful thinking at best, or wholesale deception at worst.

It feels like the finance of capitalism is some Heisenbergian monstrosity that, when functional and performant is observable and available for introspection and critique however once the wheels begin to fall off all hell breaks loose and we wind up with adolescent thinking that does all it can to elicit thoughts and prayers in an almost cargo cult performance random crap that often just serves as noise to drown out the human misery of the system itself.

Do you have evidence their MBS ratings failed?

Obviously, it's impossible to say given the massive government intervention. But AAA-rated mortgage products paid out as statistically expected. What they didn't do is hold mark-to-market value. That is what screwed people in banking who, seemingly repeatedly, can't get their heads around the difference between intrinsic and market value, on one hand, and liquidity, on the other hand. It's analogous to the hold-to-maturity debacle that felled Silicon Valley Bank.

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.

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.

did you mean SVB? they were insolvent, not just illiquid.

I think the reality isn't that there's a desired outcome or conspiracy to move things in a direction. Reality is often boring.

This is really just a few banks in a country of over 4,000 banks. Shutting down SVB, Signature, and maybe a few others isn't going to dramatically change the banking landscape toward some desired end-game. Visa and Mastercard will still be giants, none of these banks are part of the 33 large banks that get extra stress-test scrutiny or the 30 Global Systemically Important Banks, etc. This will impact the banking sector. It's likely that we'll go back to some Dodd-Frank rules that Trump repealed. Some banking profits might be impacted by FDIC assessments. Banks might reassess their risk profiles. Some might offer higher interest rates to lure deposits. However, it's hardly creating something that goes toward some radical end-game.

I mean, if your end game is "Trump shouldn't have rolled back certain Dodd-Frank protections," then yes I could see that happening. But this isn't really paving the way for something like CBDC. That doesn't mean CBDC won't happen, this just really doesn't do anything to help it along. Really, the case for CBDC is more made by the 2-3% tax Visa and Mastercard are putting on our economy. "We need a secure digital payments system that doesn't cost merchants (and by proxy consumers) 2-3% on most of their purchases," is really unrelated to a few bank failures.

I'd also note that the Fed is basically made up of the banks - not in any conspiracy theory way. The regional Fed boards are mostly chosen by the member banks of that regional Fed (with some being appointed by the Board of Governors who is appointed by the President and confirmed by Congress). The FOMC (Federal Open Market Committee) has 5 members that are regional Fed presidents (chosen by the regional Fed board who is chosen by the member banks) and 7 that come from the Board of Governors (President/Congress appoint/confirm). These aren't people who are plotting the end of commercial banking and trying to pave the way to some government-controlled single-bank.

And I don't believe that a CBDC would need to be some overbearing thing. The US needs a better way of making payments. Europe has regulated fees and also makes it really simple to send money between people. Here we're left with weird things like multi-day ACH, banking hours, and third-party cash-sending apps.

But I digress, this isn't really something that offers some major end-game. We'll probably see some regulations to ensure that banks don't face this issue in the future and that's about it.

> SMB and Signature bank suffered from a liquidity crisis rather than a solvency crisis

Solvency is complicated when we're talking about things that aren't cash. Let's say that you hold treasuries that the government will redeem in 10 years for $1.1M. You bought them for $1M and they're paying 0.96% interest per year. Normally, you could just sell them for somewhere around $1M because people are happy to buy US government debt. Now let's say the government is offering 2.5% interest on new debt. If I buy your treasury and hold it, I'm only getting $1.1M at the end. If I buy a new one, I'm getting $1.28M at the end. That's a big difference. I'm not going to buy your's at $1M despite the fact that it might nominally be worth $1M. Maybe I'll only give you $0.9M. $1.1M-$0.9M would mean a $200k gain which isn't as much as the $280k gain I'd get on new debt, but the maturity is a year closer. Still, you're losing $100k.

Ok, but that's just a liquidity issue for you, right? If someone just gave you the liquidity to hold you over until maturity, you'd get your $1.1M and be whole. Well, sorta. Realistically, with high interest rates and inflation, you're likely to lose some customers over time (who leave for banks that can offer them better rates) and you're recouping less due to inflation outpacing your investment. Plus, if someone just gives you the liquidity, you're asking them to lose money unless you're willing to pay them interest on that liquidity. Of course, if you're willing to pay them interest on that liquidity, then we're back to you being insolvent since the interest on that liquidity would be outpacing the interest in the treasuries you hold.

Assets on companies' books often don't get reevaluated every day and what something is worth can also be a bit complicated - people can disagree.

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)