It wasn’t long ago that the Fed gave most U.S. banks a passing grade in its “stress test.” And just like that financials started looking healthy again. It was only a prolonged flash in the pan, apparently, because banks are now readying themselves for a credit downgrade from Moody’s.
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Is this downgrade the crown of a slippery slope? Does it spell the beginning of a renewed financial crisis? Jim Leonard, Senior Credit Analyst at Morninstar.com, says such fears are unwarranted:
“The question always becomes is this just one more step in a series of steps where things go bad. We don’t expect that it will be. Most of the major players in the market don’t – for the U.S. banks – expect that to be the case but that will always be that concern when you see a major set of downgrades that actually come through the market.”
The official word of the downgrade – and just how bad it will be – is coming from Moody’s by the end of the month.