Morgan Stanley, Merrill, Lehman not feeling the Love from the Ratings Agencies

Yesterday S&P came out and lowered the ratings of Merril Lynch, Lehman and Morgan Stanley in a move that sent interest rate futures higher and stocks lower. There was a small recovery in both market at the close but not much to speak of. I think that this might be a slight over reaction. Do you think that with the lower rating the Fed will stop leanding to them ? Was this not expected ? Although I felt and still do that the worst is behind us, a lowered rating does not change this view. S setback yes, but only a small one. Here is the story from Bloomberg, a very good read.

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