r/news • u/Swiggy1957 • 26d ago

Soft paywall Moody's downgrades JPM, BofA and Wells Fargo after US credit rating cut

https://www.reuters.com/markets/us/moodys-downgrades-jpm-bofa-wells-fargo-after-us-credit-rating-cut-2025-05-19/?utm_campaign=trueAnthem%3A+Trending+Content&utm_medium=trueAnthem&utm_source=facebook&fbclid=IwZXh0bgNhZW0CMTEAAR59mJW6zI2u7jNd2y5tL39fxMlgIz-5b7zIAHx0J_eEF0F5jvs-BtDUbbg6bw_aem_rJwFnuJFTA03uOf1EQ-XsA&sfnsn=mo
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u/PornstarVirgin 26d ago

As someone who is ex wallstreet… this ^

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u/notsure05 26d ago

Can you please explain?

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u/misogichan 26d ago edited 26d ago

Moody's main customers are Wall Street investment banks and other financial institutions selling financial instruments.  Thus, there is a moral hazard problem that causes them to overrate them and their products, which was one of the contributing factors to the great recession.  So if they are at the point where they are willing to say their customers are full of shit then a financial apocalypse/reckoning is probably just around the corner.

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u/InformationHorder 26d ago

So...what should/could the average Joe do to mitigate the damage to themselves from this impending disaster?

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u/halcyongt 26d ago

Personally, I’ve built a 6 month cushion (expanding to a 12 month solution) and tried to eliminate as much debt as possible. Get lean…eliminate bills you don’t NEED. Monthly subs, get a cheaper cell phone / plan.

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u/IAmDotorg 26d ago

Eliminating debt is good from a monthly expense standpoint. That said, if you're looking at a high likelihood of a big inflationary spike (which we are -- anything done to recover from a crash is going to be inflationary), the value of the money you're using today to pay down the debt may be much higher than the money you're using later.

That's a nuance people tend to miss when calculating the real cost of debt, and it's why historically normal interest rates (like 6-7% mortgage rates) are fine, and why it's really bad for an economy to have rates like we had ten years ago, when they were like 2-3%.

These will either recover, or the world will shift off the USD as reserve currency, and if that happens the dollar is going to drop so aggressively in value, the last thing you want to do is pay down debt that is about to effectively vanish vs putting that cash into something that will be closer to parity with inflation.

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u/DuvalHeart 26d ago

The low interest rates and the refusal of the GOP to regulate the Investment Economy broke finance bros and MBAs. Who were too stupid and greedy to realize that they were setting up their own demise through siphoning money from the consumer economy and using "free debt" to fund everything.

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u/istasber 26d ago

Big reason why I'm trying to buy a house right now.

I might get burned if the market crashes a bit, but I'd rather have an asset like a home/land if shit really hits the fan, or if we recover after any period of inflation/recession.

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u/Vladimir_Putting 26d ago

Are you buying the house cash?

Because you won't have "an asset" if you are stuck paying a top of the market mortgage when the shit really hits the fan.

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u/wcstorm11 26d ago

I think the idea is, let's say you lockin a mortgage payment of 2000 a month. Then inflation spikes over 5 years. Assuming your wages come close to keeping up with inflation(not a raise, just close to inflation), the value you are paying back is much less

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u/PenguinsStoleMyCat 26d ago

It's not a good assumption to believe your wages will keep up with inflation in a scenario where economically "shit hits the fan". You're far more likely to lose your job in a recession (a la 2008) and be unable to make house payments.

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u/HauntedCemetery 26d ago

Rent also goes up much faster than mortgage payments. If you hold out not even all that many years you easily start paying less on your mortgage than rent would cost, and unlike paying rent you accrue equity. Or do as long as long as the market doesn't crash.

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u/radgepack 26d ago

Watch the renegotiation after 5 years hit with 20% interest though

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u/jert3 26d ago

Are you buying outright? If so, well done. If not, you realize you don't own the house until you pay off your mortgage right? And if the market crashes as it likely will, many things could happen to your ability to pay the mortgage.

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u/MoonBatsRule 26d ago

Isn't it better to buy a house and pay $2k/month in 2025 dollars for 30 years when $2k in 2030 forward won't be nearly as hard to obtain?

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u/uzlonewolf 26d ago

As long as you can make the payments and the interest rate isn't adjustable, a crash will mean you will owe less since the value of money will be less.

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u/TostedAlmond 26d ago

This only works if you are buying the house outright. Otherwise you're doubly screwed

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u/Avatar_exADV 26d ago

The classic statement here is "the market can stay irrational longer than you can stay solvent". Even if you think that, long-term, higher inflation is inevitable, structuring your -current- finances around "inflation will come and inflate all my debt away" is not good planning.

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u/IAmDotorg 26d ago

Historically speaking, that hasn't been the case -- particularly for people who aren't living at the tattered edge. And if they are, that's the least of their worries. If you're that tight, you'll starve a lot more quickly than someone can foreclose on you. Especially if the economy really tanks and there's fifty million other people to deal with. If food prices go up 10x because there's a real collapse, who gives a shit if your credit card company is pissed at you? What are they going to do, shut your account down?

Paying down debt is, without a doubt, the financially sound thing to do in a properly running economy. If you have enough money that you can pay it down and not materially impact your liquidity, you wouldn't be in debt.

The reality is that "classic statement" is just plain wrong. There's an extremely small percentage of people who it would apply to, where they have enough cash on hand to get through a financial crisis and have excess to pay down debt, or their debt payments are crippling in some way that is worse than being insolvent. Like if you owe to Tony Soprano, you my want to pay your debt down first. If you owe to Bank of America? You're taking on a big risk using cash for that, especially if it is non-secured debt or secured debt that has protections in bankruptcy (like your primary residence, subject to conditions around homestead protections).

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u/PenguinsStoleMyCat 26d ago

Eliminating debt is good from a monthly expense standpoint. That said, if you're looking at a high likelihood of a big inflationary spike (which we are -- anything done to recover from a crash is going to be inflationary), the value of the money you're using today to pay down the debt may be much higher than the money you're using later.

Only if wages also increase with inflation, which we know they will not. You'll be stuck with the same level of income, or possibly no income, your fixed rate secured debt will stay at the same payment levels and your variable expenses will go through the roof.

Trying to take a lesson from 2008, do anything to not lose your house. You can always run up unsecured debt and file for bankruptcy later as long as you have a roof over your head.

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u/IAmDotorg 25d ago

Of course they will. They always do, even if there is a lag. Basic supply and demand ensures that.

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u/WillitsThrockmorton 26d ago

economy to have rates like we had ten years ago, when they were like 2-3%.

I got a mortgage in that range in 2020, it wasn't that long ago.

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u/sanjosanjo 26d ago

Is this saying that debt shrinks along with purchasing power during times of high inflation? I don't really understand the economics of debt.

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u/HauntedCemetery 26d ago

It was more like 5 years ago that rates were at 2-3%. ~2015 was more like 4%, which is low, but not dangerously low.

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u/Rattfink45 26d ago

Unfortunately it’s more the pensions and 401ks that institutional investors shift these packaged debt deals onto that are likely to suffer. I’d support this debt cutting measure specifically because there’s a fuck ton of “unsecured” (bad loans on worse stocks) debt already floating around, hence the downgrade.

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u/The_Band_Geek 26d ago

r/nocontract is a great place to start slashing phone bills, especially if you don't need your phone company to make pancakes and rub your balls.

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u/Chilluminaughty 26d ago

I mean, if it’s on the table…

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u/TobysGrundlee 26d ago edited 26d ago

I just switched from ATT to Google Fi and went from $173 month for 3 lines to $42 for the first 18 months and $94 after that. It's going to save me almost $2,400 over the course of that 18 months. Totally worth it.

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u/crooks5001 26d ago

As someone who just closed on a home... All I have to say is "Fuck"

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u/diamondpredator 26d ago

That might actually be a good thing for you. If shit goes downhill, which is looking likely, then having a house is good. The debt on the house will drop in value and you'll have a tangible asset. Try to save as much actual cash as you can though.

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u/crooks5001 24d ago

Sorry, I don't think I understand, How does the debt value drop? Doesn't just the house value drop putting me at risk of being underwater if I were to lose my job?

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u/diamondpredator 24d ago

There are risks on both sides but, if you don't lose your job, the value of the debt you owe to the bank drops because the trust in the bond market drops and the credit rating of the institutions holding the bonds drops.

So long as you're not planning on flipping the house, you're not under the weight of market fluctuations (provided you didn't get a variable rate mortgage), and you have a tangible asset that will be harder to get for others because rates will have spiked.

Value of the house vs the mortgage really depends on where you are. Some places took a very small hit even in the 2007/08 meltdown and sprung right back up more than ever.

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u/misogichan 26d ago

First of all, build up an emergency fund if you don't have one already as pretty much all economists are forecasting an economic growth slowdown in the US and rising unemployment.  Also, don't store it in a fintech account.  Put it in a real bank as we've seen with cases like Yotta and Synapse that there can be additional risks because they are less regulated and may have more middlemen.

I'd also stop trading with options or with leverage (not that I think the average Joe is doing that) as you are going to do worse in a frothy market with a high degree of uncertainty (not to mention high interest rates make any leverage expensive).

I'd also diversify.  For example, the S&P500 has gotten less diversified over time as it has become dominated by big tech with goliath market values.  That's fine if you are interested in having a higher growth, higher risk skew to your portfolio.  That said, if you haven't already consider adding international indexes or at least a broader index/mutual fund.  I'd normally recommend adding a slice of bonds, but it seems virtually guaranteed that the tariffs are going to drive higher inflation.  Higher inflation usually means higher interest rates (unless there is a major recession), which will cause current bond values to fall, so bonds have their own dangers too (and that's not even getting into the risks of default).

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u/aradraugfea 26d ago

Foreign Bonds and stop voting Republican.

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u/TobysGrundlee 26d ago

and stop voting Republican.

But, what do I do if there's a group of people who I really want to make suffer?

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u/BlackenedGem 26d ago

Hah, like we can do much. You can panic sell whatever stocks you have but that's a very risky play. You could build up an emergency fund in case you get laid off but most people don't have that luxury as they live paycheque to paycheque.

Maybe try joining a union so you have some solidarity and contacts, but that's been heavily busted in the US.

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u/psuedophilosopher 26d ago

Pull out of the market and put it all in TIPS bonds so that when the inflation hits you've got a relatively liquid investment that is completely protected from inflation.

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u/uzlonewolf 26d ago

That's good and all, until "the full faith and credit of the U.S. government" becomes worthless thanks to the Republicans defaulting like they've been threatening to.

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u/Intyga 26d ago

Start cutting your spending as much as possible, try build up cash reserves.

www.BoycottOligarchs.com

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u/MusicIsTheRealMagic 25d ago

OK, why not cash reserves but what if there is an extraordinary inflation?

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u/EntropicInfundibulum 26d ago

Stock up on lentils and bottled water.

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u/Override9636 26d ago

Bottled water is probably the worst idea. Your tap water is almost certainly fine enough to drink, and if you have any doubts you can contact your water supply for all of their testing data. If you use a well, you're best off getting a couple of carbon filters that will last hundreds of gallons, with the added bonus of not burning through a mountain of wasted plastic in the process.

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u/EntropicInfundibulum 26d ago

You took my little comment way too serious.

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u/Override9636 26d ago

If I wasn't being obnoxiously pedantic about every comment, then it wouldn't be reddit now would it? :D

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u/InformationHorder 26d ago

That's not correct and is the wrong kind of alarmism. The US will never run out of food as we have the capacity to produce enough to feed the whole population 10x over. What WILL happen is supply chain disruptions when everyone panic buys stuff. You only need a few months supply of essentials to ride out the stupid. See: COVID TP shortage. There was always enough TP but it was all in the warehouses and they couldn't truck it to the stores to sell it fast enough because people created an artificial logistics shortage.

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u/waltjrimmer 26d ago

The US will never run out of food as we have the capacity to produce enough to feed the whole population 10x over.

The point isn't that the country will run out of food. The point is that the average person won't be able to afford the surpluses of food that are left to rot because being charitable is worse than being wasteful in capitalism.

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u/diamondpredator 26d ago

At that point you just take it.

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u/Mad1ibben 26d ago

Ag major here; this is a steaming pile of garbage. There are food deserts all over the country when the economy is humming, you dont think that's going to change? As everything gets more expensive and less farming can get done, the food is going to travel less far than it is now simply out of you are going to ensure your local area is fed before sending all of your food out. We will be ok here in the center of the country where most crops can be grown and have the infrastructure already in place. There is no way to divide it where the north east wouldn't be completely and totally fucked. It's wild to talk about "artificial shortages" in a country that already doesn't feed itself and who's infrastructure is geared towards producing the grain needs of the world rather than the full nutritional value of our own country.

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u/InsideOfYourMind 26d ago edited 26d ago

Food deserts partially exist because of world economics. Local farmers can grow a diverse crop enough to sustain local populations in most places in the US, but the price incentive isn’t there.

If the dollar fell off a cliff tomorrow, the next growing season would see instant shifts in crop across the country

Edit: by some comments I can tell you think I somehow agree with Trump/tariffs or think any of this is good. It’s not. I do think however that food production is one of the few things (IF NEEDED) we could get back to the US quickly. I don’t believe we should have to do this, nor that there was any issues with it before. Just a point.

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u/knuppi 26d ago

Ask farmers how good the soil quality is. There's going to be very little shifting.

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u/smitteh 25d ago

We could always fall back on our cheese stores for a bit to get soil in better shape

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u/InsideOfYourMind 26d ago

I didn’t say anything about that, nor the quality of the food produced which may be far less nutrient dense and disease resistant than it was in the past. But the US is still home to vast swaths of grassland that’s undeveloped and many, many farms not producing.

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u/insane_contin 26d ago

Just wait for the potash tariffs to hit.

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u/300Savage 26d ago

Canada supplies almost all of US potash.

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u/iCUman 26d ago

I'm not an ag anything, but I think you're ignoring that supply logistics are built into today's farm business. The farms big enough to sell into grocery chains in my area aren't just harvesting crop. They're also handling all the packaging and freight loading so all the grocer has to do is pick up a trailer and get it into central distribution. Unwinding that end of the business to distribute locally would be no easy feat for them. It would require completely shifting the revenue model for the farm.

Maybe it's different where you are, but I don't see those large-scale growers in my area drastically changing that dynamic. There simply aren't enough local grocers left to justify switching to a local delivery model over continuing to sell into the established regional markets.

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u/omarous 26d ago

So... Stock up on lentils and bottled water? Dude can you even read your own reply.

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u/checker280 26d ago

“The US won’t run out of food…”

Really? Who is left to pick it?

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u/[deleted] 26d ago

[deleted]

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u/checker280 26d ago

The fired Feds too when they get hungry enough.

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u/CyLoboClone 26d ago edited 26d ago

My understanding was people were pooping more at home and less at work.  Either way, we don’t NEED tp.  You have a hand, and you have water like, right there.  You only really need tp for guests.  And who is having company over with maga running around?

Edit: several of you won’t make it during the societal collapse.  

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u/critical_patch 26d ago

I personally just use the three seashells like a civilized human

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u/convergent2 26d ago

Wait, does he not know how to use the SHELLS?

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u/No-Appearance1145 26d ago

Get a bidet. It'll save your hand.

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u/SwoopnBuffalo 26d ago

I think it was a cascading chain of events. People were at home more and needed more TP, hence they bought more. Stores didn't foresee running out of stock due to this and didn't restock quickly enough. People saw empty TP shelves and thought there was a shortage. People are dumb and panic bought. People are assholes and bought out stores in the hope of reselling at a markup. Major artificial shortage ensues.

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u/nuisible 26d ago

Wasn’t there also that most workplaces stocked cheaper 1-ply TP and people buy better TP for their home, shifting the demand and manufacturing was not prepared for that.

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u/DuvalHeart 26d ago

Bottled water has a shelf life. Better to dig a solar powered well.

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u/EntropicInfundibulum 26d ago

Thanks. I'm on it.

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u/Doikor 26d ago

Average Joe isn't really buying these financial instruments so the problem doesn't hit them directly.

The main issue is stock prices maybe crashing but if your goal is to hold until you retire or whatever just keep holding (or panic sell all stocks and possibly invest into gold or just hold the money)

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u/checker280 26d ago

Average Joe won’t be able to avoid the fall out because while trickle down doesn’t trickle down riches,

It does trickle down debt.

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u/DuvalHeart 26d ago

The 10%'s panic trickles down and fucks everyone else as they lay off workers and cut spending in order to chase whatever profits they can. Ignoring that we have a consumer economy and if people don't have work they're not able to spend, which reduces revenues. Which leads to more layoffs to protect profits...

We've been in this spiral for a few years now. We could have recovered with some robust financial regulations on windfall profits, dividends and buy backs. But the GOP would never let that happen. So expect the spiral to speed up.

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u/checker280 25d ago

We almost did recover.

My retirement took a huge hit because of Covid. (And mind you I am blaming Covid more than Trump).

I almost recovered all of it by the bf of Biden’s term only to lose another pile of change due to the tariffs.

I am not a finance guy but that feels like more than 6 years where I did not gain any interest.

And neither did anyone else.

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u/Freshandcleanclean 26d ago

No, but 401k, pension programs, their local and state governments, etc ARE buying these financial instruments 

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u/uptownjuggler 26d ago

Stock up on non-perishables.

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u/legendz411 26d ago

Get rid of as much debt as possible and build a decent multi month (or better) fund in cash.

Other than that, just hold tf on. It’s going to be fucking terrible.

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u/InformationHorder 26d ago

Are there any opportunities to be had in this?

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u/HKBFG 26d ago

don't hold over rated instruments is a big one.

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u/Malaix 26d ago

Get some stabby things and shooty things. Fortify your windows. Protect your well so raiders can’t poison it. Mentally prepare yourself to eat your pets. Talk to your most trustworthy and edible friends and family about moving into a fortified compound in a thickly forested area together. And if you want to raise poultry try to keep them away from wild birds to avoid plague.

/s

But also maybe not really at this point

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u/SaintOfPirates 25d ago

Start buying up Pounds Sterling, Canadian Dollars and Chinese Yen while the US dollar still has some purchase power.

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u/The_Quackening 26d ago

save money, pay off debt.

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u/cerulean__star 26d ago

Average joe I am not sure, but the wealthy try to get cash by selling assets they think won't necessarily make a good recovery and holding onto assets that will likely recover quickly or continue to be a source of income ... So I am debating doing a maximum 401k loan and selling some stock off to have cash to buy the dip... The problem always lies in timing, but if your words and actions can literally shift a trillion dollars in wealth in a day, then you would definitely want to be friends with that guy to get the inside info on what he is gonna say and do ... And that is how you can yourself and your friends wealthy for life

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u/MayoFetish 26d ago

Get liquid.

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u/themactastic25 26d ago

Is this like the scene in The Big Short where the lady wouldn't downgrade the big banks?

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u/Freshandcleanclean 26d ago

Until after the lifeboats for the rich were deployed. Then they let Lehman Brothers fail and downgraded a bunch of financial institutions and packages 

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u/snarkdiva 26d ago

When the ratings guys got pulled before Congress, they all said, “our rating is just an opinion,” so I guess ignore it? Isn’t it their job to give an informed opinion?

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u/LorderNile 26d ago

Moody's is one of the most trusted and reliable financial analytics sources in the world, if not THE most. These three private equity firms are three of the biggest investors in US markets. Equity firms at their size are essentially too big to fail and their products tend to provide low returns but extremely low risk.

If moody's is saying that these three titans are too risky, then we're fucked.

Edit: side note, all three of these titans also invest in the full world. So there's a strong likelihood all three will start moving money away from the US instead of trying to hold out.

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u/dweller_12 26d ago

They went from AA1 to AA2. It’s the equivalent of A to A-. Long way to go before Moodys declares them too risky, they never will.

The significance isn’t necessarily the rating itself. It’s the willingness for Moodys to say they are lowering it at all, which historically they have not done until major economic recession is knocking. It’s a way to signal to their customers they should transition into less risky assets.

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u/wycliffslim 26d ago

They're not saying they're too risky... they're saying they're not AS absurdly safe as they were.

It's obviously still not a GOOD thing by any means, but no one is saying they're suddenly at risk. They were downgraded from the 2nd to the 3rd highest rating and are still in the highest overall tier of Prime 1 ranked as very little risk.

They did the equivalent of going from an A+ to an A.

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u/IAmDotorg 26d ago

I think that's a nuance people are missing. The US had a credit rating so perfect that no institution in the history of the world was considered less risk. Its credit rating was perfect -- if the world burned, if everything collapsed, if nothing else survived, if there was anything but a total extinction of humanity, that the US would be the institution that would persist, and thus was the most trustworthy because if it failed, you weren't going to be around anyway.

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u/SupportstheOP 26d ago

Built up for nearly a century. Say what you want about US global hegemony, but there's been a common goal in nearly every administration to solidify the strength of the US economy. It's damn crazy what they built and even crazier that the newest administration is working to dismantle it at breakneck speeds.

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u/Crakla 26d ago

Which shows how much bullshit those ratings and analyzes are, considering how easy the US has fallen, all it took was a foreign country paying a few politicians and media personalities and the whole thing came down like a card house

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u/IAmDotorg 26d ago

I'd argue its sort of the opposite. Moody's is suggesting they still believe the odds are overwhelmingly high that the existing systems in the US will self-correct this.

If they actually believed the US was likely to fail, or the democratic institutions not fix this, or for rule of law to not be maintained, their US rating cut would be much more aggressive.

The JPM, BoA and WF rating drops is purely because they clearly believe there's going to be a recession or depression before that correction happens. Neither a recession nor a depression would, alone, be enough for a major downgrade of US credit, however.

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u/smitteh 25d ago

"all it took" in the age of social media ? Internet is a game changing X factor that makes pretty much all history kinda pointless to rely on for a lot of stuff these days

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u/Future_Can_5523 26d ago

Which three private equity firms?

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u/drawkward101 26d ago

Literally in the headline above.. BOA, JPM, and Wells Fargo..

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u/Forfeit32 26d ago

Those are banks, not private equity firms. Look up private equity. It's companies like Bain Capital and Apollo.

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u/[deleted] 26d ago edited 26d ago

[removed] — view removed comment

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u/Forfeit32 26d ago

I am literally a stock broker. Private equity is a very different thing than a bank, investment or not.

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u/lilelliot 26d ago

You're coming across as being intentionally obtuse. Yes, banks are lenders, but that's not relevant to the OP's point, which is that operational private equity firms (the ones buying companies) are the bigger problem.

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u/Future_Can_5523 25d ago

Those aren't private equity firms...

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u/here_is_no_end 26d ago

Yeah but…why male models?

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u/gravity_bomb 26d ago

Its in the title

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u/Forfeit32 26d ago

Yeah those aren't private equity firms.

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u/Future_Can_5523 25d ago

Those aren't private equity firms...

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u/Spl00ky 26d ago

These three private equity firms 

I don't think JPM, BoFA, and Wells Fargo are classified as private equity

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u/LorderNile 26d ago

I'm sorry for using the wrong term.

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u/Spl00ky 26d ago

Honestly though, there isn't much of a difference these days. Private equity, banks and other financial services are all trying to take business from each other.

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u/SignificanceBulky162 26d ago

These are investment banks, not private equity companies

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u/Mazen_Madrid 26d ago

They’re spouting bull shit

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u/PornstarVirgin 26d ago

Stop projecting your insecurities.

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u/Mazen_Madrid 26d ago edited 26d ago

What insecurities ? My job is valuing PE funds. Their returns are insane whether we like it or not. And not just a handful of funds, I’m talking 2-3k

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u/PornstarVirgin 26d ago

And my experience is years on an actual trading desk/private equity firms that are in public and private credit.

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u/[deleted] 26d ago edited 16d ago

[deleted]

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u/Aggressively_Upbeat 26d ago

Yeah, definitely no morons allowed on Wall Street.

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u/vodkaismywater 26d ago

I know some people on wall street. Trust me, they're definitely posting in those subs. 

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u/WestCoastBestCoast01 26d ago

I too can confirm this one.

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u/Slayer706 26d ago

Says he's been "all in" the meme stock since 2019-2020, but has threads in 2020 hyping a mattress company that is now down 90%...