Thursday, December 1, 2011

S&P downgrades 15 banks

On Tuesday November 30th, Standard and Poor downgraded 15 banks in the United States, including Morgan Stanley, JP Morgan Chase, Bank of America, and Goldman Sachs. This relates to our studies on the Great Depression in that we know once there is uncertainty in the conditions of the banks, people tend to pull out their money in worries of losing their money. Times have changed since the great depression with government bail outs and being able to recover a certain amount of funds even if banks go bankrupt, however there is still a warning to the public with the downgrade of banks. To go along with discussions in class, we know that the downgrade in banks could lead to a pull out of money, and thus a decreased (D/C) ratio and thus decreased money multiplier. This could lead to a decreased money supply and higher interest rates.

http://money.cnn.com/2011/11/29/news/companies/bank_ratings_downgrades_sandp/index.htm?iid=HP_River

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