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Big Banks Tumble on Moody

Bank stocks are falling this morning as Moody's will review many of them for possible downgrade. Will the market as a whole follow?

The Effects of the Downgrade

By now, you've no doubt heard that Standard & Poor's has downgraded the U.S. credit rating one notch.

Let's first understand that this downgrade is more a political statement than a financial one. And it's not likely to affect U.S. Treasury yields much.

I think we all agree that the level of debt the U.S. has taken on is not sustainable. Spending cuts are necessary, and that will need to include the so-called entitlement programs.

Debt Deal Done: Will the U.S. Get Downgraded?

Well, well. Congress did it. And more than a full day ahead of Treasury Secretary Geithner's absolute deadline on Tuesday, August 2. I will admit, I'm surprised. Not that they reached a deal -- after all, I playfully wagered my entire business that a deal would get done with High Yield Wealth editor Steve Mausy. But I figured it would be a midnight deal.

Of course, nothing is signed, sealed and delivered just yet. I expect that may not happen until this evening. But the rhetoric from Congressional leaders and the president suggest the signatures are a formality.

Who’s Regulating the Regulators?

I've spent most of this week railing about Congress' inability to realistically deal with 2011 budget and the looming collision between government spending and the debt ceiling.

The situation is made significantly worse by the threat of a debt rating downgrade. A debt downgrade would raise borrowing costs by $100 billion a year as Treasury bond prices fall and interest rates rise. That, in turn, would make home and auto loans more expensive.

That's clearly not the best outcome...

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