Moody's Demotes US Banking System After Recent Banking Bailouts, Insolvent Deteriorating Environment

Prior to the collapse of Silicon Valley Bank (SVB), Moody’s Investors Service rated the United States banking system as “stable.” Since that time, Moody’s has downgraded American banks to “negative” status, citing a “rapidly deteriorating operating environment.”

Despite regulators’ “best efforts to shore up the industry,” to quote CNBC‘s Jeff Cox, America’s financial foundation is crumbling – which is no surprise seeing as how it was always a Ponzi scheme house of cards built on deception and bad faith.

One of the “big three” rating services, Moody’s is setting the stage for the final and inevitable collapse of America’s banking sector. One might even say that the banking sector has already collapsed, even though the powers that be are still hiding the wreckage from public view as much as possible.

“We have changed to negative from stable our outlook on the U.S. banking system to reflect the rapid deterioration in the operating environment following deposit runs at Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank (SNY) and the failures of SVB and SNY,” Moody’s said in a report.

The announcement from Moody’s came after the entity warned that it was either going to downgrade or recommend downgrading some seven institutions thus far. In addition to SVB, SNY, and Silvergate, other institutions that are under review for potential downgrades include First Republic, Intrust Financial, UMB, Zions Bancorp, Western Alliance, and Comerica.

There are likely many more banks with massive unrealized losses that are also on the hook since they purchased Treasury bonds and other government debt when interest rates were near-zero. Since that time, the Federal Reserve’s Jerome Powell has progressively hiked rates, sending the value of these bank bonds into a downward tailspin.

“Banks with substantial unrealized securities losses and with non-retail and uninsured U.S. depositors may still be more sensitive to depositor competition or ultimate flight, with adverse effects on funding, liquidity, earnings and capital,” Moody’s report further warns.

Despite this downgrading and the canary in the coal mine that it represents, numerous bank stocks rose this week. This is because the Wall Street casino is now completely detached from reality – and has been detached from reality for many, many years.