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Entries in Downgrade (13)

Monday
Aug062012

Borrowing Costs Down One Year After Downgraded US Bonds 

Comstock Images/Thinkstock(NEW YORK) -- It’s been one year since U.S. government bonds lost their AAA rating.

Many experts predicted that the downgrade would push up borrowing costs, but the opposite has happened. Bond prices soared as the yield on U.S. Treasuries fell to new lows.  

A year ago, the 10-year Treasury note yield was 2.40 percent; now, it’s less than 1.6 percent.

Cheaper borrowing costs are a plus for most consumers, especially those who are able to refinance their mortgages.

Copyright 2012 ABC News Radio

Friday
Jun222012

Moody’s Bank Downgrade May Mean Higher Lending Rates

Scott Eells/Bloomberg via Getty Images(NEW YORK) -- For the second time in a year, Moody’s downgraded 15 global banks. The credit ratings agency downgraded five of the biggest U.S. banks on Thursday, and that may lead to higher rates for consumer and even tighter lending policies.

All 15 banks were downgraded in response to lower bank profitability unlike the last downgrade in November, which was based on Moody’s change in methodology.  Moody’s and Standard & Poor’s ratings help set the rates at which banks can borrow and therefore the rates they can extend to businesses and consumers.

On Friday morning, stocks, led by banks, rallied after the second-worst sell-off of the year on Thursday. Analysts viewed the rally as a sign that Moody’s was off-base in lowering the credit ratings of the banks, which are much stronger financially than they were three years ago.

The Dow Jones Industrial average rose 0.49 percent to 12,635 at mid-morning while the S&P 500 advanced 0.41 percent to 1,331. The Nasdaq composite was up 0.52 percent to 2,874.

The stock prices of the five downgraded U.S. banks jumped on Friday morning.

Shares of Bank of America were up 0.64 percent to $7.87. JPMorgan Chase & Co. shares jumped 2.17 percent to $36.29. Shares of Goldman Sachs Group increased 0.64 percent to $94.50. Citigroup’s stock was up 1.15 percent to $28.15 a share. Morgan Stanley shares increased over 2 percent to $14.25.

On Thursday, Moody’s Global Banking Managing Director Greg Bauer said in a statement that the downgraded banks “have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities.”

“Ultimately, the downgrades are likely to trigger some near-term volatility,” said Jody Lurie, corporate credit analyst at Janney Capital Markets.

In the long term, banks that were downgraded into the triple B range will have higher costs to finance their lending activities. If those banks were actually in need of financing, that may affect retail lending activities, such as mortgages and small business loans. Theoretically, banks that were not downgraded may be able to provide better rates, Lurie said.

“In some ways, Moody’s move is a self-fulfilling prophecy: higher financing costs equals less profitability,” she said.

Copyright 2012 ABC News Radio

Tuesday
Feb142012

Moody's Downgrades Six European Countries, Warns Three Others

Scott Eells/Bloomberg via Getty Images(LONDON) -- Moody's downgraded the credit ratings of six European countries on Monday and warned that three others, including Britain, could be next.

The credit ratings agency cut Italy's grade to A3 from A2, Spain's to A3 from A1, Portugal's to Ba3 from Ba2, Malta's to A3 from A2, Slovakia's to A2 from A1, and Slovenia's to A2 from A1.  All six countries were also given negative outlooks.

Meanwhile, Moody's gave negative outlooks to the United Kingdom, France and Austria, meaning that the countries could lose their AAA ratings in the future if the economy remains weak.

Monday's downgrades and warnings are a reminder that the region continues to be plagued by debt problems.

Copyright 2012 ABC News Radio

Monday
Nov212011

Deal or No Deal, Downgrade from Moody’s Unlikely

Hemera/Thinkstock(WASHINGTON) -- With the members of the congressional supercommittee teetering on the cusp of failure, many are worried about the potential for a U.S. credit downgrade, but one Moody’s economist says that his firm is not likely to downgrade U.S. debt because it expected Congress to fail from the start.

“You know, it’s all relative to expectations and investor expectations with regard to the committee I think are -- have been and are still very, very low,” Moody’s economist Mark Zandi said on Fox News Sunday.

The committee has until Wednesday to complete and score a final deal, but last minute political posturing and blame games have led many to believe that Congress won’t meet the Thanksgiving deadline.  If that happens, Congress will have one year before supercommittee provisions kick in with $600 billion in automatic cuts from the Pentagon budget and 2 percent across-the-board cuts to Medicare providers’ payments.

Cuts of that magnitude would, in theory, calm the markets enough to prevent financial calamity.

“So this shouldn’t foster a downgrade or a run on the market or anything like that.  The $1.2 trillion in savings occurs one way or the other,” Republican Sen. Jon Kyl said on Meet the Press.

But Zandi also pointed to other looming Congressional deadlines, including an extension to unemployment benefits, a Medicare doctor payment fix, a patch to the alternative minimum tax and an extension to the payroll holiday, all of which would have a significant effect on the economy if Congress failed to act by the end of the year.

Copyright 2011 ABC News Radio

Tuesday
Sep202011

SEC Subpoenas Firms on Possible Insider Trading before US Downgrade

Ryan McVay/Thinkstock(WASHINGTON) -- Federal financial regulators have reportedly stepped up their investigation into cases of possible insider trading before the U.S. government's credit rating was downgraded last month.

Citing people familiar with the matter, The Wall Street Journal says the Securities and Exchange Commission wants to know more about traders who bet the stock market would tumble just before Standard and Poor's downgraded the U.S. from its triple-A rating on Aug. 5.  Those trades could have been hugely profitable.

SEC regulators have issued subpoenas, demanding more information from hedge funds, specialized trading shops and other firms, according to the Journal.  But it may be difficult to prove wrongdoing -- the downgrade was rumored for weeks, especially in the hours before the announcement was made.

Copyright 2011 ABC News Radio

Saturday
Aug132011

SEC Reviews S&P Downgrade Analysis Method

Scott Eells/Bloomberg/Getty Images(NEW YORK) -- The method used by Standard & Poor’s to cut the U.S.’s credit rating is under review by the Securities and Exchange Commission.

Bloomberg News reports that the SEC is investigating the S&P’s means of reaching their calculated downgrade—that U.S. officials allege is a flawed analysis—that is being held accountable for wiping nearly $6.8 trillion from global stock values from July 26 to Aug. 11.

The New York-based rating company lowered the nation’s AAA grade to AA+ on Aug. 5.

Copyright 2011 ABC News Radio

Thursday
Aug112011

Economic Downturn Spurs a Mini-Boom in Aerial Banners

Jupiterimages/Thinkstock(NEW YORK) -- Bad economic news has been good business for one entrepreneur who runs an aerial advertising company.

Justin Jaye, owner of flysigns.com, said he's had 50 to 60 more requests than usual Thursday after Lucy Nobbe, a St. Louis mom and investment banker, paid his company to fly a banner over Wall Street on Tuesday. That banner read, "Thanks for the Downgrade. You Should All Be Fired."

Nobbe's sign inspired a second banner over Wall Street Thursday -- this one from a believer in the U.S. dollar, someone who wants to promote a website he owns.

"Downgrade hurts but USD no ruble. Always be frugal," was the message on the banner over the Financial District at lunchtime, paid for by Jon Lal, 43, a Boston-based businessman who runs Befrugal.com, aimed at consumers who want to save money.

Nobbe, who was furious over politicians' dithering on the debt ceiling, originally intended for the banner to soar over Washington, D.C., but discovered that there's a no-fly zone over the capital.

"She obviously has some strong feelings about what's happening on Wall Street and the country as a whole," said Lal. "We have our own take on that topic." He characterized his banner as "a more measured way of looking at the situation."

"At the end of the day, it is a little scary to have this dire event that's never happened before," Lal said of the Standard and Poor's downgrade of U.S. debt last week. "I think some perspective would be helpful to everybody. There is no need to panic."

Jaye, whose company is based in L.A., said on Wednesday that reaction to the first banner was overwhelming. He's flown thousands of banners in 20 years in the business, and "not one has struck a chord...as much as this one," he said.

Lal's two-year-old company offers discount coupons and cashback deals as well as what he called "tools to help you be frugal," like fly/drive calculators for travelling.

Copyright 2011 ABC News Radio

Wednesday
Aug102011

'You Should All Be Fired': Mom Flies Banner Over Wall St.

Jupiterimages/Thinkstock(NEW YORK) -- A Midwestern mother and investment banker who was livid with Washington lawmakers paid for the banner that soared above Wall Street on Tuesday reading "Thanks for the Downgrade. You Should All Be Fired."

Lucy Nobbe, a single mother of two from Kirkwood, Mo., decided to have her rage flown in the face of Wall St. workers themselves when she hired a plane to tow the banner over downtown Manhattan, according to local television station KSDK. She originally intended for the banner to soar over Washington, D.C., but discovered that there's a no-fly zone over the capital.

"I chose Wall Street instead, but didn't specifically intend it to fly over S&P. I'm just a mother from St. Louis who feels the only reason we got downgraded was people in politics," she told Fortune.

"I thought that is something that I could do that wouldn't cost a million dollars and maybe someone would listen to me," Nobbe told KSDK. She said she couldn't stop thinking about how angry she was with lawmakers over the debt-ceiling bickering.

She called the company flysigns.com, which told her it wasn't possible to fly over Washington. "She asked me where would it be effective, and I said, 'Let's take it to Wall Street,'" said Justin Jaye, who owns the L.A.-based company.

He said he backed Nobbe 100 percent and offered to do the job for $895 instead of the usual $1,200 to $1,500.

"Everybody supports what she's doing. We wanted to pitch in and make it affordable for her," Jaye said.

The reaction has been overwhelming, he said. He's flown thousands of banners in 20 years in the business, and "not one has struck a chord...as much as this one."

Nobbe's daughter, Holly, told the station she was glad to have a mom who stuck her neck out. "She definitely stands up, she is different than other moms, she stands up and I'm really proud of her," Holly said.

A friend told The Observer that Nobbe was not wealthy. "She's been working and paying taxes since she was 16 years old," the friend said.

The banner was first reported by an American banker who tweeted: "An airplane just buzzed past the S&P office in Lower Manhattan pulling a banner: 'Thanks for the downgrade. You should all be fired.'"

Copyright 2011 ABC News Radio

Tuesday
Aug092011

Downgrade Backlash Puts S&P Under Microscope

Scott Eells/Bloomberg via Getty Images(DETROIT) -- First, Standard & Poor's downgraded U.S. debt from AAA to AA+.  Now, critics in and out of government are returning fire -- downgrading the credit rating company rhetorically and perhaps soon putting it under a more official microscope.

Even as S&P issued new rating downgrades from AAA to AA+ against municipal entities backed by federal leases in Miami, Atlanta and Tacoma, Washington, according to Bloomberg, the Senate Banking Committee was looking at S&P, ABC News has learned.

A committee aide said the Democrat-controlled body "is looking into the issue and gathering more information" but emphasized that so far there was no official committee probe or investigation.

In Detroit Monday, as homeowners about to lose their houses to foreclosure tried to restructure their toxic mortgages once rated AAA by S&P, a populist backlash was forming against one of the most powerful economic voices in this country.

"What credibility does S&P have as a credit agency when they did such a terrible job?" asked Peter Lawler, a homeowner.

ABC News has received angry emails from the outraged, who've called the S&P downgrade "ridiculous," "unpatriotic," saying the company should be ashamed.

"Credits agencies are a scam," wrote Judy from Georgetown, Texas.

So who are these guys who make the decisions some Americans seem so angry about?

Standards & Poor's Rating Service has been grading corporate bonds for 90 years.  Today, it has 1,226 employees and does $75 million in business every year in more than 20 countries.

But Jules Kroll, one of its main critics, who started his own, smaller rating service, says S&P is not big enough to judge 100 countries because it has only about 100 actual analysts.

"Doing analysis of the economy of the United States and its likelihood of default is something that requires enormous resources that go far beyond the resources of S&P," Kroll said.

S&P missed the Enron crisis, giving the failed company high ratings until the day it went bankrupt.  In 2008, it gave a AAA rating to toxic waste mortgages.  Then, it gave an A rating to Lehman Brothers just before the investment bank went under.  It also failed to sound the warning about the serious economic troubles in Ireland, Spain and Greece.

Despite the anger at S&P, critics have argued that it is merely the messenger, and that the government is to blame for not getting its fiscal house in order sooner.

Copyright 2011 ABC News Radio

Tuesday
Aug092011

Along with Stocks, Crude Oil Prices Are Also in Freefall

Comstock Images/Thinkstock(WASHINGTON) -- Just two weeks ago, oil prices were headed upward, to more than $100 a barrel for crude.  But by the end of the day Monday, the price of oil was down to about $81 a barrel and could fall lower than that.

The downgrading of the U.S. credit rating by Standard & Poor's, fears of another recession and volatile world markets have sent oil prices plummeting.  Ironically, major forecasting agencies were predicting an upswing of prices due to global demand surpassing supplies.

In one sense, falling oil prices are bad because they reflect a world economy in crisis.  On the other hand, it might mean that motorists in the U.S. could soon be paying a lot less for gasoline, provided they have any money left to spend once Wall Street is done tanking.

Copyright 2011 ABC News Radio







ABC News Radio