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FBN’s Liz MacDonald breaks down the report from Moody’s on the state of the banking sector.
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Hours -- now but our top story this morning Moody's downgrading more than a dozen of the world's biggest banks.
I'm -- -- -- MacDonald has been following the developments and is here in studio.
Liz first.
Expected.
But still.
Severe.
Yes and a.
Yeah that's right in other words they filed Moody's followed S&P and Fitch.
S&P came out last November.
And basically the word is for a long time now that the financial sector is not investment grade the question for the markets that today is.
Whereas Moody's two years ago when bank earnings and bank balance sheets really started.
To deteriorate and they can really say it's carried in 2009 and then took -- plunge in 2010.
And -- -- is now that the financial sector is basically looking like it was sent to Latin American debt crisis with the ratings that we're seeing today.
The swaps flow that are trading that are attached to Bank of America Citigroup.
And you know Goldman Sachs and Morgan Stanley are improving and that so that's really not an issue.
The question is where -- the fault lines that's how we're looking at the Moody's report.
Were the fault lines in the financial sector.
Because we knew that the financial sector was in -- and basically and and very serious that's straits.
And Moody's previewed that they were gonna do this report back in February week we reported two weeks ago that Moody's is gonna come out with its actions yesterday possibly today.
And it did so they've the name of the game now is -- on the -- stake -- -- are looking at where their scores are.
It JPMorgan is probably reveling in the fact that it's -- not to you know it's above.
Goldman Sachs and Goldman Sachs is trading at the lowest -- I think since since then went public in the history of the firm.
But they're the bigger issue is here you hear people talk about it and write about it that this is gonna hurt lending in this country the people are gonna have to pay.
More to get loans and I I just.
Personally I don't see how that's gonna happen because a lot of these banks are so well capitalized that's an important -- and it -- you've got record low mortgage rates already you have let's say the bank -- -- step in and said hey will give you.
We'll give you money to lend to businesses and individuals as long as you agree to do that so I don't really see.
Hey this did direct impact necessarily an immediate impact on individuals and.
No matter that is such a key point because all the banks that we talk to our vehement that lending will not stop that they will continue to -- because now.
That's their most stable earnings source is lending because of the regulatory crackdown in mood is in fact.
Said that yesterday and all of the banks are telling fox this is look.
How liquidity is at record levels and that they also.
A lot of the land loans that there -- done by the smaller banks that were not affected by the ratings downgrades but again quickly the fault lines you gotta watch out for.
Morgan Stanley and Goldman Sachs Morgan Stanley now above three notches above junk.
I think woman's sex that two of these don't have that big deposit base they've made it and they that they rely a lot of short term borrowings in the market.
And so with the ratings move yesterday that -- increased their borrowing costs that's a Moody's is concerned about is -- short term barring for these banks -- -- next now you're thank you Elizabeth thank.
