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Morning Brief: Moody’s Downgrades Large Banks

by Renewing America Staff
June 22, 2012

The Manhattan headquarters of Morgan Stanley, who received a ratings downgrade of two notches from Moody's (Andrew Burton/Courtesy Reuters). The Manhattan headquarters of Morgan Stanley, who received a ratings downgrade of two notches from Moody's (Andrew Burton/Courtesy Reuters).

Rating agency Moody’s Investors Service downgraded fifteen of the world’s largest banks by assets, including five of the six largest U.S. banks (Reuters). A Moody’s managing director explained: “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.” The downgrades came after a review of the ratings of more than a hundred banks worldwide that Moody’s first announced in February. The ratings of Citigroup, Goldman Sachs, JP Morgan Chase, and Morgan Stanley all went down two notches, while Bank of America received a one notch downgrade.

CFTC Cancels Meeting on International Swaps

The U.S. Commodity Futures Trading Commission (CFTC) postponed a meeting to propose new rules governing the derivatives activities of overseas offices of U.S. banks (Bloomberg). CFTC commissioners continue to debate the timetable for implementation of new rules resulting from the Dodd-Frank Act. Chairman Gary Gensler is optimistic for a quick resolution. Bankers have been critical of extending U.S. regulatory reach to their overseas offices, arguing that their foreign competitors who do not labor under the same regulations may gain a competitive advantage.

Corporate regulation and taxation. Read more from top economists and business experts on solutions for addressing corporate tax reform.

International Trade and Investment

More Small Firms Move Production Home

A survey of U.S. contract manufacturers found 40 percent benefited this year from work previously done abroad (Bloomberg). Small businesses in particular have moved production from Chinese suppliers to U.S. ones, to take advantage of easier communication and oversight, smaller order sizes, shorter transportation time, and reduced uncertainty. One CEO explained: “If we have an issue in manufacturing, in America we can walk down to the plant floor. We can’t do that in China.”

This CFR Independent Task Force report encourages the Obama administration and Congress to adopt a “pro-America” trade policy that brings to more Americans the benefits of global engagement.

International trade and investment. Read more from leading analysts on the debate over next steps in U.S. trade policy.

Innovation

Do Startups Still Need Patents?

An analysis of patent filings by funded startups found that while fewer startups are filing for patents, those that do are filing more often (TechCrunch). A third of funded startups have at least one published application, but patents are concentrated in “hard tech” industries such as biotech, semiconductors, and cleantech. Venture capital firms also vary widely in the percentage of firms in their portfolios that have patents, because of differing industry focuses and partners’ philosophies about patents.

Should the United States adopt a “patent box” tax incentive as several European countries have done in recent years in order to spur innovation? This Policy Initiative Spotlight examines the issue alongside a more conventional policy, the research, and development tax credit.

Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.

The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.

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