Moody's lowers Goldman Sachs

Moody's Investors Service said it downgraded the long-term senior debt ratings of Goldman Sachs Group Inc. to A1 from Aa3, excluding FDIC-guaranteed debt.

The Aa3 deposit ratings of Goldman Sachs' banking subsidiaries and all of its Prime-1 short-term ratings were affirmed, the agency said.

The outlook remains negative.

According to Moody's, the downgrade of Goldman Sachs' senior debt to A1 reflects (1) the increased vulnerabilities that the ongoing credit market crisis has exposed in the model of Goldman Sachs and other wholesale-funded investment, commercial, and universal banks; (2) the likelihood of increased structural subordination for Goldman Sachs creditors relative to its bank-level creditors; and (3) a persistent difficult operating environment that will continue to challenge the firm.

Tempering these issues, Moody's said it is now incorporating one notch of benefit to the firm's ratings for potential systemic support.

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