Five of America’s Biggest Banks Downgraded


Share This Story

Scott Eells/Bloomberg via Getty Images(NEW YORK) — Moody’s Investors Service announced Thursday that it had downgraded the credit ratings of 15 banks, including five of America’s biggest financial institutions: Goldman Sachs, Bank of America, Citigroup, JPMorgan and Morgan Stanley.

As The New York Times explains, a downgrade like this could have “serious implications for a bank’s bottom line, potentially increasing the cost of borrowing and eroding the confidence of customers and lenders. Trading partners may opt to move their business elsewhere.”

Moody’s lowered credit ratings were due to less confidence in the banks’ long-term profit and growth prospects because of so many international debt problems.

While the action does make it more difficult for banks to fund investment activites because of a hike in short-term borrowing costs, Moody’s action is not expected to have much of an impact on Wall Street Friday.

For the most part, the banks were anticipating the downgrade from Moody’s and have been putting away cash on the side to deal with it.

Ultimately, however, consumers can expect a more difficult time getting loans for small businesses, cars and mortgages — a development that will further slow down economic growth.

Copyright 2012 ABC News Radio

Respond to this story