NEW YORK - September 21, 2011 - Moody’s Corp cut the debt ratings of Bank of America Corp., Wells Fargo & Co., and Citigroup, Inc. on Wednesday, saying the U.S. government is getting less comfortable with bailing out large troubled lenders.

The government is “more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled,” the ratings agency said.

Moody’s decision hit Bank of America hardest as it cut both the long-term and short-term debt of the holding company and long-term deposits at its lead bank. The ratings agency cut only the short-term debt of Citigroup and limited the Wells Fargo cut to its senior debt and to deposits at its lead bank.

Bank of America, the second-largest U.S. bank company, is struggling with billions of dollars of mortgage losses, litigation and stresses from the need to raise capital to meet new regulatory obligations.

Moody’s noted that the risk of contagion from one failing bank to other banks has “become less acute”, adding the Dodd-Frank financial reform law of 2010 has reduced the ties between financial institutions.

When investment bank Lehman Brothers unexpectedly failed in September 2008, its debt and counterparty obligations created shockwaves throughout the global financial system.

Moody’s said laws being written about “systemically important” U.S. banks pass the burden of losses to bondholders of individual banks and away from the U.S. government and taxpayers.

The ratings agency signaled its review of a possible downgrade of the banks in June. Bank of America’s shares fell 4% to $6.62 in afternoon New York Stock Exchange trading. Citigroup shares were down 27 cents, or about 1%, at $26.64, and Wells Fargo shares slid 11 cents to $24.56.

Moody’s downgraded Bank of America’s long-term senior debt rating to “Baa1″ from “A2″ and its short-term debt rating to “Prime 2″ from “Prime 1”.

Citigroup’s short-term rating was cut to “Prime 2″ from “Prime 1”. Moody’s affirmed the long-term ratings of the third-largest U.S. bank holding company at “A3”, and affirmed the short- and long-term ratings of its Citibank subsidiary at “A1″ and “Prime-1”, respectively.

Wells Fargo & Co.’s long-term rating was cut to “A2″ from “A1″ and the rating on deposits at its Wells Fargo Bank unit was cut to “Aa3″ from “Aa2”.

Moody’s said the long-term outlook on the three banks’ ratings remains negative.