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To: Secret_Agent_Man who wrote (189340)	8/24/2002 2:44:27 PM
From: Secret_Agent_Man	Respond to of 436258

Salomon Smith Barney has downgraded Goldman Sachs, Lehman Bros., Bear Stearns, Morgan Stanley and Merrill Lynch due to a weaker third quarter due to a drop-off in fixed-income revenue. Last week S&P put its AA-/A+ counter-party credit ratings on Merrill Lynch, Morgan Stanley and JP Morgan Chase on credit-watch with negative implications. S&P sees a deteriorating environment for profits in the investment banking industry. Finally Moody’s has placed the $42.4 billion of long-term credit of JP Morgan on review for a possible downgrade. Their current and prospective profitability, as well as earnings volatility, relative to other major banks is of concern. Plus, there are the trillions of dollars of derivative exposure. A downgrade will likely make their rigging of gold prices more difficult. Total notional value of all derivatives is orders of magnitude greater than total US debt or total free world economies or both added together. Banks like Morgan evaluate their own derivatives just like they did at Barings Bank before it went bankrupt.