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Anti-climactic downgrade. As expected, Moody's downgraded Credit Agricole's (OTCPK:CRARY) credit rating to Aa2 from Aa1 and Societe Generale's (OTCPK:SCGLY) to Aa3 from Aa2, but maintained its Aa2 rating on BNP Paribas (OTCQX:BNPQY), saying the bank's "profitability and capital base currently provide an adequate cushion to support its Greek, Portuguese, and Irish exposures." Moody's also extended its review of SocGen's financial strength "to consider the implications of the potentially persistent fragility in the bank financing markets, given its continued reliance on wholesale funding." At 6:30 AM, SocGen -3%, BNP -2%, Credit Agricole +3.2%.

BNP gets in line to shrink risk exposure. BNP Paribas (OTCQX:BNPQY) announced a plan to sell €70B ($95.7B) of riskier assets to ease fears about its liquidity. BNP said the sales would reduce its balance sheet by roughly 10%, and also said it will reduce its U.S. dollar funding needs by $60B by the end of 2012; yesterday BNP denied it was having trouble borrowing dollars. The move follows a similar announcement by SocGen (OTCPK:SCGLY) on Monday.

China: We won't hold our finger in the dam. Chinese Premier Wen Jiabao says no one should rely on China to bail out the world economy. "Countries must first put their own houses in order," Wen said today. "Developed countries must take responsible fiscal and monetary policies." Asian stocks dropped following his comments, but European markets and futures have since shaken the news off.

Don't delay the inevitable. "Greece should default, and default big," Mario Blejer, who managed Argentina's central bank following the world's biggest sovereign default, says. "This debt is unpayable," he says, adding, "A small default is worse than a big default and also worse than no default."

Euro-bond plan coming up. European Commission president Jose Manuel Barroso said the EC will soon present options for the introduction of euro-area bonds, but warned the move won't put an end to the crisis. Barroso told the European Parliament that the region faces its most serious challenge in a generation - "a fight for the economic and political future of Europe."

Treasury Twist. Sources say the Treasury will cooperate if the Fed decides to launch "Operation Twist" - buying longer-term Treasurys to cap long-term interest rates by depleting supply. If the Treasury were were to sell into the Fed's buying, the effect on interest rates would be minimized. Operation Twist is one of a number of options the Fed will consider when it next meets on Sept. 20.

Bitter consensus. Only 20% of Americans believe the country is on the right economic course, and just 9% are confident we won't slide back into recession, a new poll finds. Most think it will take 6+ years for home prices to recover to pre-recession levels. While many embrace some form of austerity to reduce the deficit, they also balk at any specific spending cuts.

Chambers fails to alarm investors. Cisco (CSCO) CEO John Chambers struck a positive tone on corporate IT spending during Tuesday's analyst day. Chambers said he expects Cisco will take market share from HP (HPQ) and Juniper (JNPR), and promised he'll be "very active" in making small acquisitions. Cisco also slashed its 3-year sales growth forecast to 5-7%, from a previous 12-17% - as expected. Shares were +1.6% yesterday.

Prosecutors probe eBay. The DOJ has launched a criminal probe into whether eBay (EBAY) employees misappropriated confidential information from Craigslist. The companies have been at each other for years over allegations eBay used its Craigslist board seat to get information about the classified ad business. eBay fell 1.4% AH.

ConAgra threatens to pull Ralcorp bid. Ralcorp (RAH) fell 8.4% AH after ConAgra (CAG) said it will withdraw its $94/share bid, which RAH shunned, unless the two firms are "engaged in a constructive dialogue satisfactory to ConAgra" by Sep. 19.

Airlines fly on renewed commitment to discipline. Airline stocks (LCC) soared Tuesday after United Continental (UAL) CEO Jeff Smisek promised "continued capacity discipline." Another positive was word that carriers raised prices this week to keep margins in-line. Gainers included: LCC +16.3%. DAL +8%. UAL +7%. AMR +5.5%. LUV +5%.

Get ready for the next wave of foreclosures. Bank of America (BAC) is ramping up its foreclosure processing again, having sent out far more notices of default to borrowers in August than in previous months. Delays in processing artificially lowered foreclosure numbers over the past year due to the "robo-signing" scandal; the new surge likely addresses loans that have been long delinquent.

WaMu reorg stifled again. A Delaware judge refused - for the second time - to approve Washington Mutual's reorganization plan. In its ruling, the court says it's possible hedge funds supporting the plan engaged in insider trading of WMI securities during the bankruptcy as opponents of the plan claim.

BP in hot seat. A long-awaited federal report into what caused the worst offshore oil spill in U.S. history is set to be released as early as today, and could put BP back into the hot seat. Depositions by one of the company's petrophysicists indicate that the company failed to divulge its knowledge of a large flammable gas deposit that could have played a role in the accident.

CBO outlook grays. CBO Director Elmendorf told Congress's "super committee" the agency has lowered its economic outlook, expecting growth of just 1.5% this year and 2.5% in 2012, vs. previous estimates of 2.3% and 2.7% respectively. Unemployment - previously hoped to drop in 2012 - is now expected to remain above 9%.

Beta bane. Fears of a global financial crisis have driven correlations above 90% in every sector, including utilities, ConvergEx notes. "The difference between investing in emerging markets equities, developed markets equities and high yield bonds is now effectively zero."

Insider buying gone AWOL. Corporate insiders who scooped up shares at their year lows in mid-August are not returning to equities in similar numbers this month, despite continued market declines. Corporate execs bought just $30M of shares in their own companies in the week after Labor Day, vs. the year's peak of $162M in the second week of August.

Wednesday's economic calendar:
7:00 MBA Mortgage Applications
8:30 Producer Price Index
8:30 Retail Sales
10:00 Business Inventories
10:30 EIA Petroleum Inventories
1:00 PM Results of $13B, 30-Year Note Auction

No notable earnings today.

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Source: Wall Street Breakfast: Must-Know News