S&P Cuts Credit Ratings On 37 Global Banks

If Europe wobbles any harder, the global money center portion of the financial sector may slide into the sea. Or more likely onto the backs of the unsuspecting public.

I will be surprised if they do not try and rally stocks in the face of this to put the brave face on and whistle past the graveyard once again. This is what traders like to do when they have been caught offsides by the news. But they may not be able to sustain it without official help from the strong trading desks of the financial sector.

Forbes
S&P Goes On Downgrade Spree, Hits Most U.S. Banks
By Michael Aneiro
November 29, 2011, 5:04 PM ET

Standard & Poor’s on Tuesday afternoon grabbed its downgrade stick and went on a rampage, whacking just about every major financial institution in sight. Most big U.S. banks got hit, as did many European institutions. The downgrades were part of the rating agency’s application of its revised bank criteria to 37 of the largest rated banks. Here’s a partial list of the carnage:

Bank of America Corp. (BAC) to A- from A
Bank of New York Mellon Corp. (BK) to A+ from AA-
Barclays PLC (BCS) to A from A+
Wells Fargo Bank N.A. (WFC) to AA- from AA
Citibank N.A. (C) to A from A+
Goldman Sachs & Co. (GS) to A from A+
JPMorgan Chase & Co. (JPM) to A from A+
Morgan Stanley (MS) to A- from A



Bloomberg
BofA, Goldman, Citi Credit Ratings Reduced by S&P
By Dakin Campbell and Hugh Son
Nov 29, 2011 5:14 PM ET

Nov. 29 (Bloomberg) --Bank of America Corp. (BAC), Goldman Sachs Group Inc. (GS) and Citigroup Inc. (C) had long-term credit grades reduced to A- from A by Standard & Poor’s after the ratings firm revised criteria for dozens of the largest global lenders.

Standard & Poor’s made the same cut to Morgan Stanley (MS) and Bank of America’s Merrill Lynch unit. JPMorgan Chase & Co. (JPM) was reduced one level to A from A+. S&P upgraded Bank of China Ltd. (3988) and China Construction Bank Corp. (939) to A from A- and maintained the A rating on Industrial and Commercial Bank of China Ltd., giving all three lenders higher grades than most big U.S. banks.

The moves may increase pressure on firms bracing for Europe’s mounting sovereign debt crisis and navigating economic weakness. Bank of America, which has plunged 62 percent this year in New York trading, said in a regulatory filing this month that it may have to post billions of dollars of additional collateral and termination payments on its trades if it were to be downgraded one level by rating companies.

“It’s evident that stress from the European banking system is taking its worldwide toll,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said in an e-mail.

S&P, a unit of New York-based McGraw-Hill Cos. (MHP), has been changing the way it looks at debt after its faulty grades contributed to the credit-market seizure that brought down Lehman Brothers Holdings Inc. and Bear Stearns Cos. It started to review the methodology in December 2008, months after the collapse of those two firms.
`Adverse Impact'

Downgrades “could likely have a material adverse effect on our liquidity, potential loss of access to credit markets, the related cost of funds, our businesses and on certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical,” Charlotte, North Carolina-based Bank of America said in this month’s filing.

The company, which noted the risk of downgrades from S&P and Fitch Ratings in its third-quarter filing, previously said it has prepared by lining up funding for a year.

The following table shows firms that were downgraded by S&P, followed by a list of banks that were upgraded.

Downgraded:
Banco Bilbao Vizcaya Argentaria S.A.
Bank of America Corp.
Bank of New York Mellon Corp.
Barclays Plc
Citigroup Inc.
Rabobank Nederland
Goldman Sachs Group Inc.
HSBC Holdings Plc
JPMorgan Chase & Co.
Lloyds Banking Group Plc
Morgan Stanley
Royal Bank of Scotland Plc
UBS AG
Wells Fargo & Co.

Upgraded:
Bank of China Ltd.
China Construction Bank Corp.

Gold Daily and Silver Weekly Charts - S&P Downgrades the Credit of Most Big US Banks After the Bell

Intraday commentary on gold, silver and the world currency situation here.

American Airlines declared bankruptcy today.

After the bell S&P downgraded JP Morgan, UBS, Wells Fargo, Citi, Goldman, Bank of America et al.

"Bank of America Corp. (BAC), Goldman Sachs Group Inc. and Citigroup Inc. (C) had long-term credit grades downgraded to A- from A by Standard & Poor’s after the ratings firm revised its criteria for the banking industry.

Standard & Poor’s also made the same cut to Bank of America’s Merrill Lynch unit. S&P listed its ratings for 37 of the largest financial institutions in a statement today.

The move may increase pressure on Bank of America, which has plunged 62 percent this year in New York trading. The second-biggest U.S. lender by assets said in a filing this month that a ratings cut could trigger billions of dollars in collateral payments and crimp access to credit markets.

Downgrades may be costly for banks. Bank of America said in a regulatory filing this month that it may have to post $5.1 billion of additional collateral and termination payments on its trades were it to be downgraded one level by rating companies.

Ratings downgrades “could likely have a material adverse effect on our liquidity, potential loss of access to credit markets, the related cost of funds, our businesses and on certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical,” Bank of America said in the filing.

The company, which noted the risk of downgrades from S&P and Fitch Ratings in its third-quarter filing, previously said it has prepared by lining up funding for a year."

Some of my friends and I noted in our discussions today that the Banks were lagging the SP 500 noticeably, especially on FAZ and some other plays on bank stock declines. Because of the divergences between the SP 500 and the Banks, as well as the weakness in the NDX 100 I shifted my positions to decidedly bearish into the close.  Long gold bullion, a little silver, and short stocks.

Bloomberg says the SEC will look into any unusual activity on the bank stocks today in light of these after hour downgrades. Yeah, uh huh, sure. And they will file the information with the silver manipulation report from the CFTC.

When it comes, the financial reckoning will be like a thief in the night. Or like MF Global if you prefer. There will be a bank holiday, and after a few days you will be informed by the bank on how much of your money you have left, and when you can expect to have access to it.

SP 500 and NDX Futures Daily Charts - Bank of America And Citi Credit Ratings Cut After the Bell

American Airlines declared bankruptcy today.

After the bell the credit ratings of Bank of America and Citigroup were cut from A to A- with a negative outlook.

Additional news includes other banks including Goldman, UBS and JP Morgan.

One of my friends remarked during the day that the banks index was lagging badly, but it was not fully reflected in the SP 500 futures. Perhaps now we see why.

Currency Wars: The Anglo-American Century and Why the Financial Engineers Hate Gold and Silver

"It is only with the heart that one can see rightly; what is essential is invisible to the eye."

Antoine de Saint Exupéry

'Nominal GDP targeting' is a way of raising the Fed's inflation target without admitting to it explicitly.

Nominal GDP means that one can meet their growth target simply by inflating the money supply to make up the difference between 'real growth' and 'headline growth.'  Some parties are raising NGDP as the next policy initiative from the Federal Reserve.

NGDP targeting is so obvious and clumsy that I doubt that the Fed will try and hide their enormous efforts at monetization of the debt under such a small fig leaf, as Jim Rickards suggests, except to direct attention away from their more serious efforts.   The growth in money supply would be apparent to many and the Internet would be used to spread the word.   No, a more clever and covert attempt at persuasion is required, and more in keeping with the Bernanke Fed's penchant for secrecy.

I think the major monetization is already occurring in the Eurodollar markets, and an ongoing stealth bailout of European debt, in order to save the big money center banks at home and broaden the reach of the Dollar.

And this is why the Fed stopped reporting on Eurodollars some years ago, as a component of M3. It was to pave the way for the monetary equivalent of a financial neo-con, to addict European governance to the US dollar and pave the way for a stronger position for the dollar as a one world currency.

Money is power, and the ability to control the distribution and value of money and wealth is power in its most refined and effective form. One only needs relatively small armies to retain the power to control the money in order to subordinate vast resources and peoples if you can control their definition of wealth and the distribution of money, and all that follows from it.  

If you are able to create money at will, and give it to your friends and allies with even relative discretion, you are able to confiscate, without visible effort, the labor and wealth of every person who holds that currency, wherever they are and however they seek to protect it. It is the end of sovereignty and the right to private ownership of all goods and property that are valued by that currency. And it is a power too great to be held inviolate by any small group of men with the ability to act in secret.

I believe that the original purpose of this effort to shape the world economy was well-intentioned, or at least was represented as such to many participants as the logical solution to the devastating wars that repeatedly bloodied the last century.  

Most of what is transpiring now has not been planned, but events make the moment, and moment gives rise to the man.  And history shows us that too much power in too few hands never fails to end in exploitation.  With the rise of a single world super-power, no matter how good it might have been at its heart, the tide of corruption rose with it.  This is why central planning invariably fails.

The dominant global currency regime 'could' come in the form of the SDR for global trade if the composition of the SDR continues to contain a significant dollar-pound component.  Yes, the IMF has the ability to 'print' SDRs, but the SDR is a currency for use between nations, and its value is linked to a basket of individual domestic currencies.   Hence, it cannot be printed limitlessly, but must be linked to the value something else, some external standard.

Here is a prior blog entry here that explains the struggle for the SDR that is now occurring.   Even the 'reformed' basis for the SDR is ludicrous, with its over-representation of the dollar and the pound.  And now proceeds the dismantling and pacification of the eurozone.  And the hysterical antagonism by the Western bankers against the inclusion of gold and silver in the SDR basket as proposed by the BRICs.

Here is a broader overview of what I call the Currency Wars.

A slightly different plan has been underway for Asia, whose economies have become addicted to export production for US dollar paper, which makes up a huge portion of their reserves and financial system.

At some point those Eurodollars may come home, in the event that Europe finds a way out of its dilemma that was caused in part by the US banks and hedge funds, and of course Europe's own political weakness and greed. And the Fed is confident they have a way to stem that tide of dollars 'back in the system.'

But they do not expect this to happen, because the ratings agencies and the funds have the power to submit any government to a relentless credit assault on their sovereign debt.

Have you ever bothered to wonder why there have been no real investigations and prosecutions of the bankers and the credit ratings agencies?  And why they have been permitted to continue to operate, largely unimpeded?  The credibility trap is one explanation, but it fails to include so many other seemingly random events. Some of the banks may have become instruments of state policy, too big and important to prosecute. They and the state are becoming one.

As I have suggested in the past, the model has been to bring the system to a crisis, and then to have the bankers' representatives make an 11th hour 'offer which they cannot refuse' to the people of the nation, as they did in the adoption of TARP in the US.  'Adopt our plan, or suffer the consequences.'  

And I believe that the Anglo-American banking cartel will make this same play again, but this time with Europe and the world.  Financial crises are an effective tool in the mass redistribution of wealth and power, and often done in secret, making their appearance only at the offering of terms.

In a remarkably effective ploy of misdirection and mass persuasion, the kleptocrats and oligarchs have focused the attention and the anger of the middle class on the 'welfare state,' the poor and the elderly and the weak, under the moralistic banner of austerity. Meanwhile they are scooping up the income and wealth of nations for the top one percent, who are ironically portrayed as champions of freedom.

The sticking points in the US financiers plan are the key commodities, precious metals like gold and silver, and of course food and oil. It is a pivotal point of control that will become much more prominent in the future.  China and Russia will play that card with some of their BRIC allies.  But in the short term the Anglo-Americans are solidifying their power in the oil rich Middle East, since like gold and silver, oil is a powerful piece in this global chess game. But I do not think they can just 'take it' for themselves. And so the Mideast will remain a very important piece on the board. Perhaps it will be carved up, and perhaps it will be fought over, in the valley of Megiddo.

To paraphrase von Clausewitz, 'Currency war is the continuation of politics by other means,' especially when global military war has been rendered economically unviable in the post-atomic age.

Those who believe that China and Russia will oppose this to the bitter end believe in the purity of those regimes, and their ability to resist the temptation to participate in a deal that gives them rule over their portion of the globe. Since for the most part they are already oligarchies, this does not seem likely. The apparent disagreement and contention now may be more of a discussion of terms and territories than principles.

It may devolve into a number of popular revolutions, or even the rise of a worldly power unlike anything seen before, a new Rome. Or something else might occur. What that is, obviously no one can say with certainty for now.

A daunting set of prospects one might say, as Woody Allen once noted in his Speech to Graduates:  "More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly."  

We can take great comfort that we are not the first generation to face difficulties, and what appear to be fearsome odds.  So often when they appeared to be at the very height of their power, great empires have tumbled, and the spirit has endured and risen once again.  As Dostoevsky noted, "If they drive God from the earth, we shall shelter Him underground."

But for now, if you at least understand the objective of the game and the roles of the players, what is happening on the field can begin to make more sense. 

Even if we cannot yet see it, the greatest probability remains that the monied interests will fail in their overreach and pride, but many ordinary people will be harmed in the process.  And our goal is to do what we can to limit the damage inflicted upon ourselves and our families, and our neighbors, and associate with like-minded individuals, to try to restore some semblance of civility and justice for our grandchildren.

This currency war is happening now, and it is something new in the history of warfare, because I do not believe that a fiat currency regime has ever existed before to this extent on a global scale, with a mutually destructive threat like nuclear power dampening the impulse to wide scale military conflict.

But as in all war, some things never change.

"When the rich wage war, it is the poor who die."

Jean-Paul Sartre

At some point the dawn will come, but first the darkest hour. Our business is not to surrender to discouragement, and cooperate with evil,  but to carry on in our missions, whatever they may be, as God gives us light.

"When I despair, I remember that all through history the way of truth and love has always won. There have been tyrants and murderers and for a time they seem invincible, but in the end, they always fall — think of it, always."

Mohandas K. Gandhi

The ascendancy of evil in the world is a shameful episode in history; the triumph of dark powers in claiming our souls for all time, without end, is a tragedy.

In the meantime, here is an exposition of 'Nominal GDP targeting' so you can become familiar with it, in case it does make an appearance.