Moody's warned that the ax was coming, and today it came. The credit rating agency downgraded 15 major financial firms today in a move that is sure to hurt their bottom lines and rattle markets, the New York Times reports. Moody's knocked Credit Suisse down by three levels, Morgan Stanley by two, and left Bank of America and Citigroup just two ranks above junk, reports Bloomberg. JPMorgan and Goldman Sachs also went down two notches.
The downgrades are a major blow to banks, which are already struggling to deal with regulations, a struggling US economy, and a sovereign debt crisis in Europe. But Moody's was determined to be rigorous after going easy on financial firms before the financial crisis. Affected banks will face higher borrowing costs and damaged core business in areas like derivatives. They will also go on offense, trying to convince customers that Moody's has overreacted: "We believe the ratings still do not fully reflect the key strategic actions we have taken," said Morgan Stanley in a press release. (Read more Moody's stories.)