MS vs JEF

If Moody’s follows through with their threat of downgrading Morgan Stanley to BBB, they will have the same rating as Jefferies.  That rating is tough for a bank with a big balance sheet to carry.  People got concerned about JEF and they had a small balance sheet, were able to take it down quickly, and at end of last quarter they were running less than 10x leverage.  MS has 807 billion of assets.  They can tap the fed for liquidity, so that is something JEF didn’t have, and so far it is only Moody’s being so potentially tough, but I think the market is being a bit too calm about this.  Especially as much of the MS business model has to switch as elements of Dodd-Frank finally start getting implemented.