In a widely expected move, Standard & Poor's downgraded some big U.S. banks.

Bank of America, Bank of America Merrill Lynch, Morgan Stanley, Goldman Sachs and Citigroup had their long-term credit ratings cut to A- from A. JPMorgan Chase was cut one level to A from A+. Wells Fargo had its rating lowered to A+ from AA. The move reflected a change in methodology that the rating company had been preparing the market for some time. The key change seems to be an assumption about "too big to fail."

In what might be hailed as victory for those who think banks should be allowed to fail, the downgrades reflect S&P's basic belief that the government is less likely to bailout big banks that run into trouble.  There are plenty of skeptics, who think that the idea of "too big to fail" is alive and well and that none of the measures put in place will amount to much in the throes of another crisis. Still, as of right now, the concept is certainly out of vogue. And big U.S. banks have disadvantaged -- globally speaking -- in terms of costs of funds.

The ratings of top European banks were generally unchanged. Banco Santander remains rated A-, Commerzbank remains an A, and Credit Suisse and Deutsche Bank held their A+ ratings. S&P upgraded some big Chinese banks, as well. Bank of China and China Construction moved to A from A-, while Industrial and Commercial Bank of China maintained it's a rating.  

All in all, the ratings of S&P and Moody's matter less than in the past. They certainly are no longer seen as the rock-solid arbiters of creditworthiness, not after the financial crisis and the U.S. debt S&P downgrade fiasco. But these sorts of moves are news worthy nevertheless. The impact hopefully will be limited.

For more:
- here's a Washington Post article

Related articles:
Credit rating agencies assess debt crisis   
For banks, a new era of reduced expectations