Shooting the Messenger

Moody’s downgraded a number of major financial institutions after concluding a review that was started in February:

NEW YORK (CNNMoney) — Some of the world’s biggest banks were downgraded Thursday by rating agency Moody’s, which cited concerns about the stability of the global financial system.

Moody’s cut the ratings of 15 financial institutions after U.S. markets closed Thursday, including giants like Bank of America, Goldman Sachs and JPMorgan.

“All of the banks affected by today’s actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities,” Moody’s Global Banking Managing Director Greg Bauer said in a statement.

Moody’s review of the banks, announced in February, was prompted by a “reassessment of the volatility and risks that creditors of firms with global capital markets operations face.” Among the risks Moody’s cited were “more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions.”

From the looks of it, banks like JP Morgan and Royal Bank of Scotland did not agree with Moody’s assessment of their situation and have been spending time in media attacking Moody’s for downgrading them. I, for one, am glad that institutions like Moody’s rate banks and other actors in order to give us outsiders/amateurs a perspective on how sound their investments and outlook really are.  Instead of attempting to shoot the messenger, perhaps JPM and RBS would be better served by trying to identify and deal with the problems pointed out by Moody’s?