The debate about too big to fail has been raging, with no end in sight. But have the credit rating agencies already made up their mind on the outcome? Standard & Poor's has revised its outlook on Bank of America (BAC) and Citigroup (C) to negative from stable. A negative outlook indicates a rating downgrade is more likely over the next two years. The reason? Increased uncertainty about whether the government will step in to provide extraordinary support in a way that benefits bond holders.

"We previously stated our belief that the extraordinary support was temporary," S&P said in its release. "We believe markets are beginning to stabilize, and the U.S. government is seeking ways to reduce the potential for moral hazard and systemic risk associated with large financial institutions." The bank also said that earnings at the bank will remain under pressure. The loss of certainty about future bailouts will likely add an upward bias to the interest rate it will have to pay bondholders. The politics of all this could change quickly, however.  

For more:
- here's a Reuters article

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