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Moody’s Slashes Ratings on 15 Banks

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    Professor Peter Morici breaks down the impact of the ratings cut.

  • Duration 4:19
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That right now we want to talk more.

About our top story this morning Moody's decision to cut the credit ratings of fifteen of the world's biggest banks -- me now from Washington DC.

Is University of Maryland economics professor Peter Marie CMR Murray say good to see this morning -- well.

This was so well telegraphed.

We should not be shocked it will there be any fallout from this downgrade.

Whether -- the expectation.

That bank while they'll they'll be higher rates to pay for banks on their bonds and so forth.

So then they're gonna pay more for their money which means.

With them holding 60% of the deposits in the United States a huge market share.

Big consumers will pay more for loans including businesses it'll be more expensive to do business in the United States and to buy a home.

But significantly more expensive we have a mortgage rates Peter at record lows.

So I think it's a little bit more -- and it yet the Federal Reserve standing by extending its program to buy longer term securities standing at the ready.

To do even more we heard that very clearly earlier this -- side.

I'm -- is that really it that big of a drag on the economy.

I think for Fannie -- and Freddie -- it is actually no consequence at all because -- -- their money a different way.

But I think for conventional loans out on the -- you know that kind of in these very big conventional loans it may have some consequence.

I don't know that the Federal Reserve can put a big enough and -- on those rates you know over the next several years that they have to get a little higher.

Peter what about all the other concerns.

In this is in this market that are way that people worried about weighing on economic growth we saw yesterday.

With the Philly Fed you've seen that numbers coming from countries around the globe about.

A weakening economy how -- do you think the world economy gets between now and end of the year.

The world economy is extraordinarily.

Fragile.

And expectations are very poor the Europeans seem extraordinarily disorganized and -- odds with each other -- story of management by committee.

They simply can't get their act together to do what they need to do.

The European Central Bank is the only institution that has the firepower.

To deal with the problems in Spain Italy that -- that large that the bailout fund is not big enough.

And the sooner or later they gonna have to tell the European Central Bank.

You know you might not like -- damaging your credibility but if you don't -- what you might not exist in two years.

And in the United States.

Are we just heard on the Imus show.

You know how the president does is so disorganized and and the US economy seems rudderless on the economy -- sixteen minute speech on the economy.

Would simply a rehash.

Of what he has said in the past there are no new ideas with the economy so poor.

You would think we'd have a change in direction.

And it's going to be all -- -- February before we really have another president if we get one.

That's it awfully long time and a 24/7 economy it's not just a new cycle it's -- -- any.

Yeah like -- -- -- magnitude.

Of the borrowing bubble that we had and the deleveraging that's going on.

Around the globe is there anything one individual leader in this country can do regardless of who it says.

They can really write this chef and bring -- again economy growing faster than paltry 2% or less than 2%.

Well a lot of.

This has to do with the imbalance between Asia and the United States in Europe in terms of trade that was that that one of the route one of the two root causes.

Of the of the global financial crisis.

And that you know -- be Great Recession and -- dressing that for example the United States could take a very hard line with China on trade and domestically could develop more oil.

You know but opened up the gulf and you know we had the kind of boom down there that we have you know in North Dakota and opened up drilling on the two coasts and Alaska.

You know that would that would generate an enormous infrastructure project.

Part of this is the ideology.

Of the Democratic Party and the White House they simply don't believe in using domestic resources.

And they don't believe an acting forcefully internationally.

But without those things you can't fix the American economy -- that's where the problems are.

Haters gonna talk -- thank you so much University of Maryland professor Peter -- CB well Peter have a great weekend.

It should take care now.

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