- Moody’s downgrades ten prominent US banks and flags six more due to persistent funding risks.
- US household debt reaches an alarming $17.1 trillion, with significant rises in mortgages, auto, and student loans.
US Banking Crisis Deepens:
A menacing cloud hovers over the American banking landscape, as renowned credit rating agency Moody’s delivers a fresh round of downgrades to key banks, amplifying the alarm bells already ringing in the sector.
The most recent blow came when Moody’s slashed ratings for ten pivotal small to mid-sized US banks. This list features prominent names like Commerce Bancshares, BOK Financial Corporation, M&T Bank Corporation, and several others. The ripples don’t stop there: titans of the industry such as Bank of New York Mellon, US Bancorp, and State Street also find themselves on Moody’s watchlist, possibly staring down the barrel of future downgrades.
This shift in stance by Moody’s, transitioning the outlook for eleven banks from ‘stable’ to ‘negative,’ is indicative of an underlying turmoil. The agency’s insights revealed,
“Many banks’ second-quarter results displayed escalating profitability pressures, potentially affecting their capital generation capacity.”
It also warned about a looming mild US recession by early 2024, with the integrity of assets poised for a downturn, especially within commercial real estate portfolios of certain banks.
Looming Debt Disaster:
In the backdrop of Moody’s revelations, another dire picture is emerging — the monumental growth in US household debt. According to a report by the global capital markets outlet, the Kobeissi Letter, staggering figures indicate a mounting debt crisis. The US currently grapples with a historic $17.1 trillion household debt, of which mortgages alone account for $12 trillion. If that wasn’t concerning enough, auto and student loans each comprise an unprecedented $1.6 trillion, with credit card debts touching the trillion-dollar mark.
These figures emerge just a week after Fitch, another heavyweight in the ratings sphere, downgraded the US currency, indicating a foreseen
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“fiscal deterioration over the ensuing three years.”
The report cautions about a perilously growing government debt burden.
As financial pundits mull over these revelations, a resonating sentiment prevails:
“We are combating inflation with debt.”
This strategy is a precarious one, and the looming question is, will the US navigate these tumultuous financial waters, or are we on the cusp of another significant economic downturn? Only time will tell.
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