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Here We Go: Moody's Downgrade Is Out - Morgan Stanley Cut Only 2 Notches, To Face $6.8 Billion In Collateral Calls

Tyler Durden's picture





 

Here it comes:

  • MOODY'S CUTS 4 FIRMS BY 1 NOTCH
  • MOODY'S CUTS 10 FIRMS' RATINGS BY 2 NOTCHES
  • MOODY'S CUTS 1 FIRM BY 3 NOTCHES
  • MORGAN STANLEY L-T SR DEBT CUT TO Baa1 FROM A2 BY MOODY'S
  • MOODY'S CUTS MORGAN STANLEY 2 LEVELS, HAD SEEN UP TO 3
  • MORGAN STANLEY OUTLOOK NEGATIVE BY MOODY'S
  • MORGAN STANLEY S-T RATING CUT TO P-2 FROM P-1 BY MOODY'S

But the kicker:

ONLY MORGAN STANLEY, HSBC CUT LESS THAN MOODY'S ORGINAL MAXIMUM.

And there you have it - the reason for the delay were last minute negotiations, most certainly involving extensive monetary explanations, by Morgan Stanley's Gorman (potentially with Moody's investor Warren Buffett on the call) to get only a two notch downgrade. And Wall Street wins again.

Recall, from MS' 10-Q:

"In connection with certain OTC trading agreements and certain other agreements associated with the Institutional Securities business segment, the Company may be required to provide additional collateral or immediately settle any outstanding liability balances with certain counterparties in the event of a credit rating downgrade. At March 31, 2012, the following are the amounts of additional collateral, termination payments or other contractual amounts (whether in a net asset or liability position) that could be called by counterparties under the terms of such agreements in the event of a downgrade of the Company’s long-term credit rating under various scenarios: $868 million (A3 Moody’s/A- S&P); $5,177 million (Baa1 Moody’s/ BBB+ S&P); and $7,206 million (Baa2 Moody’s/BBB S&P). Also, the Company is required to pledge additional collateral to certain exchanges and clearing organizations in the event of a credit rating downgrade. At March 31, 2012, the increased collateral requirement at certain exchanges and clearing organizations under various scenarios was $160 million (A3 Moody’s/A- S&P); $1,600 million (Baa1 Moody’s/ BBB+ S&P); and $2,400 million (Baa2 Moody’s/BBB S&P)."

So instead of $9.6 billion, MS will face only $6.8 billion in collateral calls.

Still the firm is not out of the woods:

Any indications of control failures, a marked increase in risk appetite or deterioration in leverage or other capital metrics would lead to downward pressure on the ratings.

The negative outlook on the parent holding company reflects Moody’s view that government support for US bank holding company creditors is becoming less certain and less predictable, given the evolving attitude of US authorities to the resolution of large financial institutions, whereas support for creditors of operating entities remains sufficiently likely and predictable to warrant stable outlooks.

Sure enough, here is the immediately released Morgan Stanley statement. Odd that the firm knew in advance what the rating cut would be...

While Moody’s revised ratings are better than its initial guidance of up to three notches, we believe the ratings still do not fully reflect the key strategic actions we have taken in recent years.  However, their acknowledgment of our long-term partnership with MUFG as well as our industry-leading capital and liquidity highlight some of the transformative steps we have taken.  With our de-risked balance sheet, stable sources of funding, diverse business mix and strong leadership team, we are well positioned to deliver for clients and shareholders.

And let certainly not forget JP Morgan:

The negative outlook on the parent holding company reflects Moody’s view that government support for US bank holding company creditors is becoming less certain and less predictable, given the evolving attitude of US authorities to the resolution of large financial institutions, whereas support for creditors of operating entities remains sufficiently likely and predictable to warrant stable outlooks.

 

The lowering of the standalone credit assessment to a3 positions JP Morgan in the first group of firms with significant global capital market activities. This position reflects the risks related to JP Morgan’s (i) very large capital markets business (representing 26% of reported firm-wide revenues in 2011); (ii) relatively high absolute level of secured and unsecured wholesale funding within the overall balance sheet; and (iii) the recent control failure within its Chief Investment Office (CIO), which has tarnished JP Morgan’s otherwise strong track record of risk management. These factors are mitigated by (i) JP Morgan’s diversified and sustainable earnings streams from its five other lines of business; (ii) relatively low earnings volatility compared with the peer group; (iii) good structural liquidity and large liquidity pool; (iv) capital levels that are solid and resilient under Moody’s stress tests; and (iv) leverage that is below the industry median.

 

JP Morgan’s recently announced loss within the CIO was an important factor in the downgrade of the standalone credit profile. It illustrates the challenges of monitoring and managing risk in a complex global organization — and highlights the opacity of such risks. The firm has substantial earnings and liquidity, which affords it the time to work out of the positions. Management is also acting aggressively to stem the losses and has already added new controls to the CIO.

 

These risk factors have been fully incorporated into the current standalone assessment. Since JP Morgan is positioned in the first group of firms with global capital markets operations, upward pressure on the rating is unlikely, absent a material shrinking and de-risking of the investment bank, which Moody’s does not anticipate. Any further control failures, a marked increase in risk appetite or a willingness to increase leverage could lead to downward pressure on the ratings.

In Summary:

  • Bank of America L-T senior unsecured debt cut to Baa2 from Baa1, outlook negative.
  • Barclays L-T issuer rating cut to A3 from A1, outlook negatuve
  • Citigroup L-T senior debt cut to Baa2 from A3, outlook negative
  • Credit Suisse Group L-T deposit, senior rating cut to A1 from Aa1, outlook stable
  • Goldman Sachs Group L-T senior unsecured debt cut to A3 from A1, outlook negative
  • HSBC Holdings L-T senior debt cut to Aa3 from Aa2, outlook negative
  • JPMorgan Chase L-T senior debt cut to A2 from Aa3, outlook negative
  • Morgan Stanley L-T senior unsecured debt cut to Baa1 from A2, outlook negative
  • Royal Bank of Scotland Group L-T senior debt cut to Baa1 from A3, outlook negative
  • Royal Bank of Scotland plc L-T deposit rating cut to A3 from A2, outlook negative
  • BNP Paribas L-T debt, deposit rating cut to A2 from Aa3, outlook stable
  • Credit Agricole L-T debt, deposit rating cut to A2 from Aa3, outlook negative
  • Royal Bank of Canada L-T deposit rating cut to Aa3 from Aa1, outlook stable
  • Societe Generale L-T debt, deposit cut to A2 from A1, outlook stable
  • UBS L-T debt, deposit cut to A2 from Aa3, outlook stable
  • Deutsche Bank AG L-T deposit rating cut to A2 from Aa3, outlook stable

Of course, for what really matters we go straight to the clients, and show the top 5 issuers, not banks, all corporate issuers, who are most viewed by all of Moody's clients. Aka the real bucket list.

Full report:

Moody's downgrades firms with global capital markets operations

New York, June 21, 2012 -- Moody's Investors Service today repositioned the ratings of 15 banks and securities firms with global capital markets operations. The long-term senior debt ratings of 4 of these firms were downgraded by 1 notch, the ratings of 10 firms were downgraded by 2 notches and 1 firm was downgraded by 3 notches. In addition, for four firms, the short-term ratings of their operating companies were downgraded to Prime-2. All four of those firms also now have holding company short-term ratings at Prime-2. The holding company short-term ratings of another two firms were downgraded to Prime-2 as well.

"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", says Moody's Global Banking Managing Director Greg Bauer. "However, they also engage in other, often market leading business activities that are central to Moody's assessment of their credit profiles. These activities can provide important 'shock absorbers' that mitigate the potential volatility of capital markets operations, but they also present unique risks and challenges." The specific credit drivers for each affected firm are summarized below.

Today's rating actions conclude the review initiated on 15 February 2012 when Moody's announced a ratings review prompted by its reassessment of the volatility and risks that creditors of firms with global capital markets operations face. In the past, these risks have led many institutions to fail or to require outside support, including several firms affected by today's rating actions. Today's actions, however, reflect not only the credit implications of capital markets operations. They also reflect (i) the size and stability of earnings from non-capital markets activities of each firm, (ii) capitalization, (iii) liquidity buffers, and (iv) other considerations, including, as applicable, exposure to the operating environment in Europe, any record of risk management problems, and risks from exposure to US residential mortgages, commercial real estate or legacy portfolios.

RATINGS RATIONALE -- STANDALONE CREDIT DRIVERS

Moody's assessment of each firm's standalone credit profile led to the following relative positioning of the firms:

--FIRST GROUP

The first group of firms includes HSBC, Royal Bank of Canada and JPMorgan. Capital markets operations (and the associated risks) are significant for these firms. However, these institutions have stronger buffers, or 'shock absorbers,' than many of their peers in the form of earnings from other, generally more stable businesses. This, combined with their risk management through the financial crisis, has resulted in lower earnings volatility. Capital and structural liquidity are sound for this group, and their direct exposure to stressed European sovereigns and financial institutions is contained.

Firms in this group now have standalone credit assessments of a3 or better (on a scale from aaa, highest, to c, lowest). Their main operating companies now have deposit ratings of Aa3, and their holding companies, where they exist, have senior debt ratings between Aa3 and A2. Their short-term ratings are Prime-1 at both the operating and holding company level.

--SECOND GROUP

The second group of firms includes Barclays, BNP Paribas, Credit Agricole SA (CASA), Credit Suisse, Deutsche Bank, Goldman Sachs, Societe Generale and UBS. Many of these firms rely on capital markets revenues to meet shareholder expectations. Their relative position reflects a combination of differentiating and sometimes adverse factors. Capital markets operations constitute a large part of the overall franchises for Credit Suisse, Goldman Sachs, Barclays, and Deutsche Bank, but less so for UBS, Societe Generale, BNP Paribas and CASA's cooperative group, Groupe Credit Agricole.

Other factors contribute to the relative positioning. For example, Barclays, BNP Paribas and Groupe Credit Agricole have, to varying degrees, relatively robust shock absorbers. Exposure to capital markets businesses is very high for Goldman Sachs, but this is balanced by a record of effective risk management. Barclays, BNP Paribas, Groupe Credit Agricole, and Deutsche Bank also have sizeable but varying degrees of exposure to weaker European economies. Some firms are relatively weak with regard to structural liquidity or reliance on wholesale funding.

Firms in this group now have standalone credit assessments of baa1 or baa2. Their deposit ratings range between A1 and A2, and their short-term ratings are Prime-1 at the operating company level. Their holding companies, where they exist, have senior debt ratings between A2 and A3 and short-term ratings between Prime-1 and Prime-2.

--THIRD GROUP

The third group of firms includes Bank of America, Citigroup, Morgan Stanley, and Royal Bank of Scotland. The capital markets franchises of many of these firms have been affected by problems in risk management or have a history of high volatility, while their shock absorbers are in some cases thinner or less reliable than those of higher-rated peers. Most of the firms in this group have undertaken considerable changes to their risk management or business models, as required to limit the risks from their capital markets activities. Some are implementing business strategy changes intended to increase earnings from more stable activities. These transformations are ongoing and their success has yet to be tested. In addition, these firms may face remaining risks from run-off legacy or acquired portfolios, or from noteworthy exposure to the euro area debt crisis.

Firms in this group now have standalone credit assessments of baa3. Their deposit ratings are A3 at the operating company level. Their holding companies, where they exist, have senior debt ratings between Baa1 and Baa2. Their short-term ratings are Prime-2 at both the operating and holding company level.

Moody's has today published a special comment titled "Key Drivers of Rating Actions on Firms with Global Capital Markets Operations" (http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_143246), which provides more detail, including the rating rationale for each firm affected by today's actions. Please refer to the following webpage for additional related announcements: http://www.moodys.com/bankratings2012

RATINGS RATIONALE - SENIOR DEBT AND DEPOSITS

Moody's systemic support assumptions for firms with global capital markets operations remain high, given their systemic importance, and have not been a key driver of today's rating actions. While Moody's recognizes the clear intent of governments around the world to reduce support for creditors, the policy framework in many countries remains supportive for now, not least because of the economic stress currently stemming from the euro area and the potential systemic repercussions of large, disorderly bank failures and the difficulty of resolving large, complex and interconnected institutions.

However, reflecting the view that government support is likely to become less certain and predictable over time, Moody's has assigned negative outlooks on certain supported ratings of entities affected by today's actions, particularly at the holding company level, as discussed in detail in the firm-specific summaries below. Moody's view on support considers efforts by policymakers globally to create resolution and bail-in regimes that allow for more flexible and limited support in a stress scenario.

RATINGS RATIONALE -- SUBORDINATED DEBT AND HYBRIDS

In addition, Moody's has today downgraded the subordinated debt and hybrid ratings of the firms whose senior debt ratings have been repositioned. The downgrades reflect the revised senior debt ratings and, in some cases, also the removal of systemic support assumptions from subordinated debt classes. In Moody's view, systemic support in many countries is no longer sufficiently predictable and reliable going forward to warrant incorporating systemic-support driven uplift into these debt ratings.

RATING IMPLICATIONS FOR SOME SUBSIDIARIES WILL BE ASSESSED SEPARATELY

Moody's has also today taken rating actions on a number of subsidiaries and legal entities of firms with global capital markets activities, as summarized below. However, for some other subsidiaries of firms included in today's announcement, Moody's will separately assess the impact of their parents' reduced credit strength.

RATING REVIEWS OF MACQUARIE AND NOMURA WERE CONCLUDED EARLIER

Of the 17 banks and securities firms with global capital market operations that were placed on review for downgrade in February, the reviews of two firms were concluded separately. Please see the following press releases for further information: "Moody's downgrades Nomura Holdings to Baa3 from Baa2; outlook stable, (http://v3.moodys.com/viewresearchdoc.aspx?docid=PR_240381) published 15 March 2012, and "Moody's downgrades Macquarie Bank to A2, Macquarie Group to A3," (http://v3.moodys.com/viewresearchdoc.aspx?docid=PR_240306) published 16 March 2012.

 

And specifically:

 

MORGAN STANLEY

Morgan Stanley’s senior unsecured long-term debt ratings were downgraded to Baa1 from A2 and the long-term deposit and issuer ratings of Morgan Stanley Bank, N.A. were downgraded to A3 from A1. The short-term ratings of both firms were lowered to Prime-2 from Prime-1. Moody’s also downgraded Morgan Stanley’s standalone credit assessment, to D+/baa3 from C/a3. The outlook on the standalone credit assessment and the ratings of Morgan Stanley’s operating subsidiaries is stable, while that on the senior debt and subordinated debt ratings of (or guaranteed by) the parent holding company is negative.

Morgan Stanley’s ratings benefit from three notches of uplift due to external support assumptions. This includes one notch of uplift from its largest shareholder, Mitsubishi UFJ Financial Group (MUFG, deposits Aa3, standalone credit assessment at C/a3 at Bank of Tokyo-Mitsubishi UFJ, Ltd), and two notches of uplift owing to Moody’s belief that there is a high likelihood that Morgan Stanley, as a systemically important financial institution, would receive support from the US government in the event such support was required to prevent a default. The one notch of uplift reflecting potential support from MUFG is the reason the downgrade was less than the guidance Moody’s provided on 15 February.

The lowering of the standalone credit assessment to baa3 positions Morgan Stanley in the third group of firms with significant global capital markets activities. This position reflects (i) the firm’s commitment to the global capital market business, on which it relies heavily for earnings; (ii) its historically high level of earnings volatility; and (iii) the problems in risk management and controls the firm suffered during the crisis. Partly mitigating these factors are (i) the firm’s gradually increasing "shock absorbers" in the form of earnings from other more stable businesses (albeit still below that of most peers); (ii) its reduced risk appetite, improved liquidity profile and stronger capital position; and (iii) enhancements to risk management, internal processes and controls.

The stable outlook on Morgan Stanley’s standalone credit assessment and the ratings of its operating subsidiaries reflects the view that the capital markets-related risk factors have now been fully incorporated into the ratings. Moody’s does not expect significant upward pressure on the firm’s ratings. Any indications of control failures, a marked increase in risk appetite or deterioration in leverage or other capital metrics would lead to downward pressure on the ratings.

The negative outlook on the parent holding company reflects Moody’s view that government support for US bank holding company creditors is becoming less certain and less predictable, given the evolving attitude of US authorities to the resolution of large financial institutions, whereas support for creditors of operating entities remains sufficiently likely and predictable to warrant stable outlooks.

 


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Thu, 06/21/2012 - 18:51 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

Looks like MUFG stepped up to the plate in order to avoid the three notches down. Still, a multi billion dollar collateral call has got to hurt.

Thu, 06/21/2012 - 19:04 | Link to Comment bxy
bxy's picture

I bet you can't guess which banks generate the most fees for Moody's.

Thu, 06/21/2012 - 19:09 | Link to Comment Coldfire
Coldfire's picture

This will do wonders for the Margin Stanley bonus pool.

Thu, 06/21/2012 - 19:14 | Link to Comment W10321303
W10321303's picture

THE EMPIRE crumbles, BLAME the little old ladies on Medicare and those 'WELFARES' on food stamps. (thus sayeth the EMPEROR and the serial killer GOP)  "Let 'em DIE!"

Moralistic rather than economic reasoning

The public debate in Germany and elsewhere is often moralistic, matching the economists’ concern with moral hazard.

• Countries that have long considered the government budget as a purely theoretical constraint cannot now simply ask for help.
• The same applies to countries that have allowed their banks to fuel a housing price bubble and now socialize the resulting private losses.

Banking supervision laxity

As we know, poor bank supervision is what drove Ireland and Spain into the camp of guilty countries. Here again, the story is not over and several countries may soon be found guilty of forbearance.

• Top of the list are France and Germany.
• Had Greece not been rescued then some large French and German banks, already fragilised by the subprime crisis, could well have been ripe for costly bailouts.

The debt reduction scheme applied to Greece effectively provided these banks with an exit strategy, and was delayed long enough for them to dispose of a large part of their initial holdings of Greek public debt. Even so, these same banks remain on the danger list if more defaults are needed, which is in fact the case. The list of truly innocent countries includes a small number of small countries.

The consequences of bad debt and banking policy

As for consequences, the issue is incredibly difficult. Austerity has been the accepted norm for punishment.
Austerity proponents at first sought to characterise austerity as only moderately painful – and this a ‘good pain’ that would provide a useful lesson for future generations.

But the facts have now completely undermined this view.

• The myth of expansionary fiscal contractions, also known as the negative multipliers, has now been proven disastrously wrong.
• Its last proponents point to Latvia as proof that it works, but it unclear where this assessment comes from.

The Latvian public debt is still rising as a percentage of GDP and GDP is now 15% lower than in 2007 before the stabilization plan. True, this is up from a loss of 20% in 2010, but this merely illustrates how positive the multipliers are.

The costs to Latvia have been massive

Greece

The Greek experience is one of never-ending economic decline, massive unemployment and intense social hardship. Sure, the Greeks are being taught a lesson, but which one?

• Resistance to economic reforms is as intense now as it was before the crisis but xenophobia and the appeal of populist politicians is rising spectacularly.
• The multiplier debate tends to conceal the political consequences of austerity in the midst of a recession.

As economists, we also need to look slightly beyond our pond.

When these aspects are factored in, the consequences of the strategy adopted in 2010 are simply not justifiable, even on moral grounds. This is so especially as those who are punished most are not those that benefitted most from fiscal indiscipline in the run up to the EZ crisis.

The May 2010 strategy is a disaster: Admit mistakes and move on

Thu, 06/21/2012 - 19:24 | Link to Comment 10044
10044's picture

Tyler

leave the "victory clip" for when gold hits $2000... then we can shove the clip down charlie munger and nouriel roubini's faces.

Thu, 06/21/2012 - 19:33 | Link to Comment Amish Hacker
Amish Hacker's picture

It must really suck when you don't have a single down day trading for an entire quarter, and STILL you get a call from the margin clerk.

Suggestion to MS: you could improve your balance sheet simply by moving customer assets over to Accounts Receivable. 

Thu, 06/21/2012 - 19:37 | Link to Comment Threeggg
Threeggg's picture

So the MS data entry accountant is working overtime tonight......................

Login to current account..........................

Numlock...............

+  6,800,000,000

Enter<

Log off............................................

Heading over to Happy Hour...................................

Thu, 06/21/2012 - 19:45 | Link to Comment luna_man
luna_man's picture

 

 

CRIMINALS!

 

Keep up the EXCELLENT work!!...MY MAIN MAN!!

Thu, 06/21/2012 - 19:50 | Link to Comment luna_man
luna_man's picture

 

 

Oh, remember...NO PRISONERS!!  Right?

Thu, 06/21/2012 - 20:33 | Link to Comment Jim in MN
Jim in MN's picture

 

'Moody's: We Pussy Out...So You Don't Have To'

Thu, 06/21/2012 - 20:42 | Link to Comment Offthebeach
Offthebeach's picture

The 7 billion plasma sucked corpses would be ground to meal and tube fed to genetically modifed, hairless pigs. The pigs will be blind, limbless and deaf. They will float unconscious in pools and produce satisfying human like plasma for elites to prosper.
Until such "farms" are scalled up, elect Muppets will be saved for plasma milking .
Only when the select are free of carrying the dead, dragging weight of the Muppet masses, can true humans begin to reach their God status.

Thu, 06/21/2012 - 21:23 | Link to Comment Mr_Wonderful
Mr_Wonderful's picture

Backlash of the IRSwap machinery. When´s the next U.S. Govt. downgrade due? It may wipe out JPM. The reality of its recent loss is probably $15-18 Billion. The JPM derivatives contain about $57.5 Trillion in interest rate derivatives.

Thu, 06/21/2012 - 21:35 | Link to Comment David Fiderer
David Fiderer's picture

Whenever a global bank gets a triple-B, or Baa, rating, it's usually a too-big-to-fail rating, meaning that if the company did not rely on the implied support of the government, it would likely be doomed. A government backstop  provides access to liquidity, which is oxygen to a bank, to forestall the possibility that trading counterparties would immediately pull their unsecured lines. 

If the fed funds rate were not close to zero, the various downgrades to P-2 would also be meaningful. 

The insolvency of BofA is old news. If the banks were compelled to write down all their 2nd lien mortgage debt to its true value, several top US banks would would be ready for a government takeover.

 

This strikes me as a soft-landing, two step downgrade process.

Thu, 06/21/2012 - 21:51 | Link to Comment Let The Wurlitz...
Let The Wurlitzer Play's picture

Debt quality, downgrades and defaults are going to be the themes of the next eighteen months.  Everybody should just get used to this story.  The dot-com buble has burst, the real estate buble has burst, the commodity buble has burst and now the grand dady of them all - the debt buble is beginning to burst.  The fun has just begun.  Just watch how ALL assets will be destroyed globally and the hunt for safe currencies begins.

 

Thu, 06/21/2012 - 22:35 | Link to Comment tkinfo
tkinfo's picture

They haven't won. Have you seen what we short selling hedge funds have done to the bank stocks? Take a look at TBTFs including Citibank, down 95% from the highs to BofA, down 80%+, to JPM, down 25% from the peak. These companies are broke, stocks are going to Zero. And we're gonna continue to profit all the way until the plane crashes on to The Good Earth. :)

Thu, 06/21/2012 - 23:46 | Link to Comment benjamin_1114
benjamin_1114's picture

It's not shocking that Moody's didn't downgrade Wells Fargo.  I'm sure Moody's was told not to lift the skirt on the $1.8 TRILLION in off-balance sheet assets that Wells has. The fact analyst have inquired about them a number of times and no response/explanation is given is a red flag alone. My personal favorite is the wells order they have received for documents on mortgage bonds they originated that have blown up, Wells Fargo has decided to just not answer them and pretend the order was never received. The only thing Wells has done correct is choose to disclose nothing. It's like if your dog poops on the carpet and instead of cleaning it up you just kick that turd under the couch, moral of the story is their house still smells like SH*T.  FUCKING LOSERS

Fri, 06/22/2012 - 03:46 | Link to Comment q99x2
q99x2's picture

In 2007 the banks were paying ratings agencies to top rate financial weapons of mass destruction. Now they are paying them to downgrade themselves. Prepare for an invasion by DHS and internment in the FEMA camps. The plan is unfolding.

Fri, 06/22/2012 - 06:50 | Link to Comment Satan
Satan's picture

AAA,AA C+ with negative outlook blah,blah blah...

This is their rating -

TBTF

The barber shop is closed.

Fri, 06/22/2012 - 09:28 | Link to Comment kristian01
kristian01's picture

lest we forget the forecasted panic 2 months ago after the various downgrade disclosures by the big-5 their 10K's came out.  nice work, ZH.  remember, never wrong, often early

"[BAC] would need to post up to $6.2 billion in collateral: an amount which would cripple the bank's liquidity,  and send its stock plunging as visions of AIG resurface, and concerns about a toxic downward spiral emerge."

"cripple" their liquidity?  LOL

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