The Banking Crisis in America: Moody’s Downgrades Banks, Flags Funding Risks
The banking crisis in America shows no signs of abating, as leading ratings agency Moody’s continues to issue warnings and downgrades for major banks due to funding risks. This week, Moody’s downgraded ten small to mid-sized U.S. banks and flagged six banking giants for potential downgrades. The agency also shifted the outlook of eleven banks from stable to negative.
Main Breakdowns:
- Ten small to mid-sized U.S. banks were downgraded by Moody’s
- Six banking giants, including Bank of New York Mellon and US Bancorp, were flagged for potential downgrades
- Eleven banks had their outlook shifted from stable to negative
- Moody’s predicts a mild US recession in early 2024 and highlights risks in commercial real estate portfolios
- Banks are still at risk of a withdrawal rush and high interest rates are impacting investments
Moody’s points out that the catalysts of the banking crisis earlier this year are still present, with growing profitability pressures and declining asset quality. This news caused U.S. stock markets to fall on August 8, while the U.S. currency was downgraded by Fitch ratings agency the previous week.
Looming Debt Disaster
The Kobeissi Letter, a global capital markets outlet, reported on August 9 that the United States has reached record levels of household debt, mortgages, auto loans, student loans, and credit card debt. With a total of $17.1 trillion in household debt, the United States is facing a concerning situation of fighting inflation with debt. The report concludes that this cannot end well.
Hot Take:
The downgrades and warnings from Moody’s, coupled with the record levels of debt in the United States, paint a grim picture for the banking industry and the overall economy. The ongoing banking crisis and the increasing debt burden indicate potential trouble ahead, with the risk of recession looming. It is crucial for individuals and institutions to closely monitor these developments and take appropriate measures to protect their financial interests.
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