Yesterday Moody's cut the credit ratings of 15 global banks. Included in that group are five American banks, Bank of America, Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley. While this action was not unexpected, it is still just another indication of the troubled global economy.
What does a downgrade of the credit ratings of these institutions mean to everyday Americans? Well, it will make it more difficult to get auto loans and consumer loans. It also costs the downgraded banks billions of dollars in extra collateral, making an already shaky economy even more uncertain.
At a time when the American people and businesses are looking for stability in the economy, this action clarifies that our equity markets will be further unsettled. The downgrades come at a tumultuous time within the banking industry. Banks have struggled to improve their profits against the backdrop of the European sovereign debt crisis, a weak American economy and new regulations.
It's time for the President to face reality, quit playing politics, and give the American people some straight talk.
Americans are resilient. We can deal with bad times. What we can't deal with is an Administration that says things are “fine,” when it’s clear that we continue down a very shaky economic road.