Moody's Investors Service (
) gave its token downgrade to a dozen global banks (NYSEArca: IXG)
including five of the six largest U.S. banks. And financial stocks
responded by going up.
The SPDR S&P Bank ETF (NYSEArca: KBE) closed ahead by 1.36%
while financial stocks (NYSEArca: XLK) within the S&P 500
(NYSEArca: SPY) ended higher by 0.92%.
Before the 2008-09 U.S. financial crisis, Moody's and other
rating agencies inflated credit ratings and now they're trying to
earn back their credibility. But the crookedness of their credit
analysis is still here.
The Wall Street Journal reported that Morgan Stanley's CEO James
Gorman "can pat himself on the back after four months of back and
forth and public lobbying" to convince Moody's not to downgrade the
bank by too much. Did it work? Moody's reduced the Morgan Stanley's
credit rating by just two notches and the bank escaped much worse
expected cut of three notches. It pays to lobby.
It's no secret the creditworthiness for global banks is in a
spiral, but we don't need no stinking ratings to tell us what we
already know. During the boom years, credit ratings were inflated.
And now during the bust, they're still probably inflated, even
after the token cuts.
The Select Sector FinancialSPDR (NYSEArca: XLF), which includes
Bank of America (
), Citigroup (
), Goldman Sachs (
), JPMorgan Chase (
), and Morgan Stanley (MS) as components is ahead 10.6%
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