|America's Broken Banking System|
Downgrades generally mean higher borrowing costs for the riskier banks.
Of course not to be on the Chicken-little-sky-is-falling bandwagon... but let's not be naive either. This move may prove to be especially worrisome as it comes at a time when the U.S. economy teeter-totters on the verge of another possible recession.
The upside so far seems to be that the markets are shrugging off the announcement. According to George Strickland of the Thornburg Investment Management Inc.:
"...the worst-case scenario for downgrades was already reflected in securities prices. If anything, the market is reacting with relief,” said Strickland, who helps oversee $14 billion of fixed-income assets as a managing director at Santa Fe, New Mexico-based Thornburg. Morgan Stanley bonds likely will rally, said Strickland, whose firm owns the bank’s debt.
“The market is shrugging it off.”http://www.bloomberg.com/news/2012-06-21/credit-suisse-cut-3-levels-as-moody-s-downgrades-biggest-banks.html
Okay... it sounds good that those big investors don't seem to be worried... but just how will this downgrade impact lending to many of the "mom-n-pop" companies, who are currently afraid to expand, hire or make any bold moves right now until they know the outcome of Obamacare and how it will impact their businesses?
So...before we shrug-off this news prematurely... I say we "Batten down the hatches", brothers and sisters, and see how long and bumpy this economic ride will be... and where we will end up when its over!!!