The downgrading storm continues! The "government backing" aura fading, Moody's downgrades rating of large US banks.

Moody's Corporation has downgraded the deposit ratings of some large banks including Bank of America Corp (BAC.US) and JPMorgan Chase (JPM.US), citing the downgrade of the United States credit rating last Friday and the weakened ability of the US government to support these banks. The long-term deposit ratings of Bank of America Corp, JPMorgan Chase, and Wells Fargo & Company's subsidiaries have been downgraded by one level to Aa2, which is the third highest rating by Moody's Corporation. Moody's Corporation also downgraded the senior unsecured debt ratings of some subsidiaries of Bank of America Corp and New York TrustCo Bank Corp NY (BK.US) from Aa1 to Aa2. In addition, Moody's Corporation has downgraded the long-term counterparty risk ratings of Bank of America Corp, New York TrustCo Bank Corp NY, JPMorgan Chase, State Street Corporation (STT.US), and Wells Fargo & Company's subsidiaries by one level to Aa2. This is the latest fallout from Moody's Corporation downgrading the United States sovereign credit rating. Last Friday, Moody's Corporation lowered the US's highest credit rating by one level to Aa1, and blamed successive US governments and Congresses for the continually expanding budget deficit with no signs of relief. This downgrade will affect companies, investors, and consumers who actually provide deposits, engage in derivative transactions, or lend to banks by purchasing unsecured debt from bank subsidiaries. Moody's Corporation stated that the US government provides some level of support for the debt of these "too big to fail" entities. Moody's Corporation analysts stated, "The downgrade of the US government rating indicates a reduced ability to support these high-rated debts." Therefore, Moody's Corporation has removed the "one-notch uplift for support" that was previously included in the banks' ratings due to government support. However, some debt or business ratings of several large US banks will temporarily retain this uplift mechanism. The long-term senior unsecured debt ratings and issuer ratings of JPMorgan Chase and Wells Fargo & Company, as well as some subsidiary's counterparty risk ratings and assessments of Morgan Stanley (MS.US), still retain the government support uplift factor.