Oh dear–Moody’s just downgraded their outlook on the entire US banking system from “stable” to “negative.” Money quote:
The firm, part of the big three rating services, said Monday it was making the move in light of key bank failures that prompted regulators to step in Sunday with a dramatic rescue plan for depositors and other institutions impacted by the crisis.
“We have changed to negative from stable our outlook on the US banking system to reflect the rapid deterioration in the operating environment following deposit runs at Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank (SNY) and the failures of SVB and SNY,” Moody’s said in a report.
The move followed action late Monday, when Moody’s warned it either was downgrading or placing on review for downgrade seven individual institutions.
The moves are important because they could impact credit ratings and thus borrowing costs for the sector.
In its downgrade of the entire sector, the rating agency noted the extraordinary actions taken to shore up impacted banks. But it said other institutions with unrealized losses or uninsured depositors still could be at risk.
Well, THAT’S gonna leave a mark.
ETA: Oh, and just for shits and giggles for the people who believe THEIR bank is Just Fine, a primer on Fractional Reserve Banking, which has to be one of the dumber ideas ever floated in the financial world.
Fractional reserve banking is how all banks work all the time. Without it, there wouldn’t be mortgages, credit card and auto loans would be much, much harder to get. Heck, there wouldn’t be banks, because running a bank cost money and many banks only make money because they can issue mortgages financed by deposits, the very essence of fractional reserve banking.
This would be the same Moody’s that didn’t notice any problem at all until after SVB had been taken over by the Feds on Friday? Their opinion is worth about as much as the journalists on the financial news who always constructive a rational narrative after the market has moved.
Moody’s ratings do matter to the extent that some investment funds are constrained to invest only in bonds with a certain minimum credit quality, but I don’t see how that makes much difference here.
This is about as ignorant as saying that money isn’t really worth anything and we should go back to the barter system.
The video you linked to (which I’m not going to watch) appears to be associated with UKIP, so I assume it is right wing populist fearmongering nonsense.
Well no shit there, Sherlock, I’m just finding it mordantly funny that even Moody’s is having to admit the Emperor’s willie is hanging out for all to see.
And don’t watch the video, no skin off my ass, but it’s pretty amusing to see an MP in '13 taking people to task. Even broken clocks are right twice a day, or only once if they’re digital.
Your ignorant claim that Fractional Reserve Banking is “one of the dumber ideas ever floated in the financial world” is not right at any time of day, even by chance.
It’s like saying that trains are one of the dumber ideas ever invented in the history of civiliztion just because incompetent safety protocols led to a major train accident.
OK. I’m seeing a globally dominant hyperpower with a extremely strong economic system which, even at its worst during the Great Depression, was still the most dominant in the world.
To save you from further embarrassment, I suggest that you don’t double down on trying to explain the details of something that you don’t understand.
Why don’t you try doing the same. The remarkable quality of life that we enjoy is the result of the greatest economic success story in the history of civilization, facilitated by fractional reserve banking.
Feel free to stop using the banking system. That usually goes along with putting all your money into physical gold, digging a bunker, stockpiling weapons and freeze dried dinners.
I can recommend Peak Refuel Sweet Pork & Rice. The two main markets for freeze dried dinners are backpackers and preppers, but we actually eat them.
That’s one helluvan excluded middle y’all are flailing around in there. Yes, there is NO place in between huge overleveraged banks up to their pupiks in toxic “assets” and the lumpy mattress method. None at all. Especially not credit unions, not keeping balances over the FDIC/NCUA limits in one bank and keeping a goodly liquid cash reserve handy in case of weekend bank difficulties. Nope, it’s one or the other, good going there!
I’m not entirely sure you appreciate that the vast majority of posters in this thread would welcome that excluded middle with huge overleveraged banks reined in by government regulations.
What they don’t agree with is your assessment that fractional reserve banking is a dumb idea. It isn’t a dumb idea, but it is an idea that requires sensible management that is often voted down by those looking for higher profits.
Well, it’s an idea that, as currently practiced, is shit. How’s that? Yes, if things were managed properly and banks were required to keep a pretty sizable percentage of solid liquid assets on hand (that they don’t get to borrow every night from the Fed to meet the current requirements, which are ludicrously low) then sure, fractional reserve banking would be okay. Which is like saying that, if every time two people had sex one of them choked the other to death, that “sex is GREAT, it’s NATURAL, everyone NEEDS SEX.” Well, except for the ones who die of strangulation, they might have a different view of the matter–if they weren’t, y’know, dead and all.
Do you not see the irony in you claiming others are guilty of fallacy of the excluded middle, when the problem here was that you equated the fundamental concept of fractional reserve banking with ‘overleveraged banks up to their pupiks in toxic “assets” .’
Are you under the impression that credit unions do not use fractional reserve banking?
You realize that you are simply discussing the appropriate “fraction” in the concept of fractional reserve banking, right?
Um… so your “analogy” with sex requires that sex be 100% fatal? I’m not really sure what to do with that.
Again, the more apt analogy is that there has just been a major train accident, and rather than discussing the failures in safety protocols, you are condemning trains as a terrible idea.
