Quick Hits: Banks Rein in Lending Ahead of Slowdown
Brief scrutiny of today's headlines.
Capital cushions are at a seven-year low and with each round of ratings downgrades from S&P and Moody's (MCO), banks' ability to lend continues to drop off.
Sheila Bair, chairman of the Federal Deposit Insurance Corporation, or FDIC, says more downgrades would threaten the good standing of big banks like Citigroup (C), Bank of America (BAC) and Wells Fargo (WFC). She called the current situation "unprecedented."
Contracted lending means consumers and businesses will spend less, intensifying the economic downturn. Still, all manner of creatively contrived metrics are being used to rationalize a bottom. While the Federal Reserve's support of JP Morgan's (JPM) purchase of Bear Stearns (BSC) may have staved off a financial crisis, it delayed the necessary capitulation real market turning points require.
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