BankThink

The downgrading of the government to double-A-plus was not only correct but overdue. If anything, S&P should have taken Uncle Sam down to double-A-minus, given the deadlock over revenues and spending.

A firm we know needed a $20,000 letter of credit to extend its lease. So, it went in turn to the banks it uses, at each of which it maintains cash deposits well north of an order of magnitude larger than the letter of credit requested. Also, the firm has no debt and has annual revenues in the high seven figures. So, could it get the letter of credit renewed?

Receiving Wide Coverage ...Downgrade Reaction: Saying the budget deal didn't do enough to fix America's finances, Standard & Poor's Friday dropped the U.S. debt rating to AA-plus from AAA. Perhaps more ominous, the agency said a further downgrade is possible. Included in the reaction, Standard & Poor's and other ratings agencies "have never given us any reason to take their judgments about national solvency seriously," columnist Paul Krugman writes in the Times. Even though S&P made a $2 trillion error in calculations in the press release it sent to the U.S. Treasury for preliminary approval, S&P downgraded U.S. government debt anyway. The Journal said, "The rating cut by S&P on long-term U.S. debt threatened to upend one of the fundamental underpinnings of the financial markets going back decades: The risks and pricing of practically every major investment have been measured against the idea that U.S.-government debt was risk free.'" The Post, meanwhile, reported that Treasury Secretary Timothy Geithner and Federal Reserve Board Chairman Ben Bernanke had a conference call Sunday night with other economic leaders about how they would respond to the S&P downgrade. Another Journal story dealt with the downgrade's impact on the mortgage market. Still another article says that despite the downgrade, Treasuries will remain the safe haven for investors. Meanwhile "Heard on The Street" said the rating action could be a positive if it spurs "new urgency to tackle deficits and thorny economic issues."

Notes from the World Council of Credit Unions' World CU Conference in Glasgow, Scotland, as well as some other points from across the pond ...

The banks and credit card companies have spent 50 years building a proprietary, locked-down system that handles roughly $2 trillion in credit card transactions and another $1.3 trillion in debit card transactions every year.

The downgrading of U.S. government debt by Standard & Poor's Friday evening is a grim milestone in the history of American finance—and one that will be parsed in excruciating detail in coming days—but the ultimate practical impact on financial institutions seems likely to be minimal in the short term. The reasons are many.

We wonder if it's the same individual who talked to CNBC and ABC News, but it's hard to tell since ABC identified their source as "a government official," while CNBC's is merely "someone familiar with the matter." But the information is essentially the same: the federal government is expecting and preparing for a downgrade by Standard & Poor's Corp.

A Microsoft security tool that has been criticized for being too intrusive can be turned off by the very malware it was designed to fight.

The buzz word "duplicative" has been making the rounds lately, employed by watchdog groups and politicians to describe government programs which overlap and offer redundant services at taxpayer expense.

Except when empowered by exclusive legal standing — for instance, in marketing checking accounts — banks consistently fail in competing to sell financial services to consumers. The most dramatic example is wealth management, but there are many others.