You’re probably aware that Fitch has downgraded the credit rating of the United States from AAA to AA+. It was big news last week.
That’s nothing to cheer about, though it’s not likely to have much impact on the markets in the short run. It’s more of a long-term problem.
But it’s certainly another straw in the wind showing that the U.S. is on a non-sustainable fiscal course that can only end in default, hyperinflation or protracted depression-level growth.
Meanwhile, another major credit ratings agency, Moody’s, has just issued its own downgrades that may foretell a much more immediate threat.
And they don’t involve the government.
On Monday, Moody’s cut the credit ratings of 10 small and midsize U.S. banks, while placing six large banks on watch for potential downgrades.
The six large banks include Bank of New York Mellon, U.S. Bancorp, State Street and Truist Financial.
Moody’s has also lowered its outlook to negative for 11 major banks, including Capital One, Citizens Financial and Fifth Third Bancorp.
Here’s what Moody’s said yesterday:
Many banks’ second-quarter results showed growing profitability pressures that will reduce their ability to generate internal capital.
This comes as a mild U.S. recession is on the horizon for early 2024 and asset quality looks set to decline, with particular risks in some banks’ commercial real estate (CRE) portfolios.
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