Are Dozens Of Major U.S. Banks About To Have Their Credit Ratings Downgraded?

 

CNBC: Fitch warns it may be forced to downgrade dozens of banks, including JPMorgan Chase 

* Fitch Ratings cut its assessment of the banking industry’s health in June, a move that analyst Chris Wolfe said went largely unnoticed because it didn’t trigger downgrades on banks. 

* But another one-notch downgrade of the industry’s score from AA- to A+ would force Fitch to reevaluate ratings on each of the more than 70 U.S. banks it covers, Wolfe told CNBC. 

* “If we were to move it to A+, then that would recalibrate all our financial measures and would probably translate into negative rating actions,” Wolfe said.

A Fitch Ratings analyst warned that the U.S. banking industry has inched closer to another source of turbulence — the risk of sweeping rating downgrades on dozens of U.S. banks that could even include the likes of JPMorgan Chase. 

The ratings agency cut its assessment of the industry’s health in June, a move that analyst Chris Wolfe said went largely unnoticed because it didn’t trigger downgrades on banks. 

But another one-notch downgrade of the industry’s score, to A+ from AA-, would force Fitch to reevaluate ratings on each of the more than 70 U.S. banks it covers, Wolfe told CNBC in an exclusive interview at the firm’s New York headquarters.  

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WNU Editor: Here is an easy prediction. The U.S. government and the banks are not changing their fiscal/debt/credit policies. A downgrade will happen, the only question that needs to be answered is when.

Egan-Jones Cuts U.S. Rating One Step To AA

Egan-Jones Cuts U.S. Rating One Step to AA Citing Growing Debt -- Bloomberg Businessweek

Egan-Jones Ratings Co. cut the U.S. credit rating one step to AA, the second downgrade in nine months and two levels below its highest grade, with a negative outlook citing the nation’s increasing debt burden.

U.S. debt has increased to 100 percent of gross domestic product, while debt climbed 23.6 percent from 2008 to 2010, the credit-rating firm said in a statement today. Egan-Jones lowered the U.S. grade to AA+ in a July. Treasuries have gained 4.6 percent since the company first lowered the U.S. rating, according to Bank of America Merrill Lynch index data.

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Update: Egan-Jones Cuts US Credit Rating to 'AA,' Citing Debt -- CNBC

My Comment: In my professional life this is big news news .... correction .... this is huge news. Expect the other rating agencies to follow through with their own cuts in the next few months. Why is this significant .... the credit agency is bluntly saying that failure to cut the U.S. deficit will mean higher borrowing costs in the future. My prediction .... this is one more reason why I believe sequestration will happen to the defense budget.