Walmart & Costco Mortgages! Bank Downgrades.

“Option ARM’s on Aisle 4!” Could Walmart, Safeway, or Costco offer mortgages to its shoppers? The idea is not so far-fetched.

If you’ve ever traveled across the Atlantic, you’ve probably seen Tesco, a global grocery and general merchandise retailer headquartered in the UK. It’s the third-largest retailer in the world measured by revenues (after Wal-Mart and Carrefour) and the second-largest measured by profits (after Wal-Mart). And next year it will be offering mortgages to its shoppers.

Retail store mortgages seem all the more probable as retail bank brands continue to get hammered.

Moody’s downgraded the long-term and/or short-term debt ratings of Bank of America, Wells Fargo and Citigroup with a negative outlook on the long-term debt rating for all.

In BofA’s case:

Moody’s Investors Service has downgraded the ratings of Bank of America Corporation’s (BAC) holding company to Baa1 from A2 for long-term senior debt and to Prime-2 from Prime-1 for short-term debt. The long-term deposit ratings of Bank of America N.A. (BANA) were downgraded to A2 from Aa3, while BANA’s short-term rating was affirmed at Prime-1. The outlook on the long-term senior ratings remains negative.

The downgrades result from a decrease in the probability that the US government would support the bank, if needed. Moody’s believes that the government is likely to continue to provide some level of support to systemically important financial institutions.

However, it is also more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled, as the risks of contagion become less acute. Moody’s is therefore lowering the amount of support it incorporates into Bank of America’s ratings to levels reflected prior to the crisis.