Moody's Sows Bank Mayhem With Downgrade Threats

NEW YORK (TheStreet) -- Like a tsunami after an earthquake, Moody's Investors Service(MCO) 's review for downgrade of 17 global securities dealers--announced in February and telegraphed by the ratings agency as long ago as Jan. 19 has continued to roil the banking sector over the past several weeks.

While debt downgrades typically matter because they can increase funding costs, the far bigger threat in this instance is that lower-rated banks will see client defections in their derivatives trading operations.

Goldman CFO David Viniar's perennially even-tempered voice betrayed a rare note of irritation as he discussed the possible Moody's downgrades.

Most analysts focused on U.S. companies seem to think the hardest-hit by the potential actions would be Morgan Stanley(MS) , but Goldman Sachs(GS) , seen as potentially gaining market share from its rival, hardly sounds happy about the prospect of standing taller in a land of midgets.

"We very strongly disagree with some of the things that Moody's has mentioned in some of their reports," said Goldman CFO David Viniar in the only part of the company's April 17 earnings call.

Viniar's perennially even-tempered voice betrayed a rare note of irritation as he discussed the topic.

"We think that if you look at every single credit metric there is for Goldman Sachs and frankly for many of our competitors, none of the actions they talked about are warranted. We are as you know, we're quite analytical and we do all of the analysis. We cannot figure out why they are where they are," he said.

Despite his evident displeasure, Viniar then tried to downplay the issue.