Wall Street braces for impact (17)

NEW YORK — A downgrade of United States’ top-tier credit rating has Wall Street scrambling to figure out the knock-on effects for the financial system, from mortgages to banks to markets that rely on U.S. Treasuries for collateral.

The immediate effects of the Standard & Poor’s downgrade of the country’s AAA credit rating late on Friday are likely to be modest, largely because it was expected and already at least partly discounted, experts said.

Many downplayed the likelihood of the sort of financial contagion experienced when Lehman Brothers went under in September 2008. Few had expected it to have to file for bankruptcy, and few were prepared for the fallout. Money market funds froze, some major commercial banks collapsed, and many major dealers and finance houses teetered on the edge of failure.

But even if that type of scenario is unlikely this time, bankers, lawyers and investors wonder if there could be longer-term consequences of S&P’s downgrade, given that U.S. sovereign credit is bedrock to the world financial system.     The analysis is complicated because so many of the potential stress points for the financial system are relatively opaque areas like over-the-counter derivatives markets.


See Also:

G20 pledges action as ECB backs Spain, Italy

Some European Markets Gain, While Markets in Asia Sink After U.S. Credit Downgrade

Europe markets hit by fresh turmoil

Austerity has failed, eurozone on brink as world crisis rages

Afternoon Updates:

12:17 pm EDT, August 8th, 2011 — S&P fallout: Fannie and Freddie downgraded

12:18 pm EDT, August 8th, 2011 — S&P downgrades Fannie and Freddie, US-backed debt

12:19 pm EDT, August 8th, 2011 — No Statement or Comment from Obama on U.S. Credit Rating Downgrade

12:20 pm EDT, August 8th, 2011 — Dem: US credit down because of military spending

12:21 pm EDT, August 8th, 2011 — Captain of the Titanic agrees to go down with the ship

12:23 pm EDT, August 8th, 2011 — Two Weekend Op-Eds Exemplify the Delusions of the Left and the Insights of Conservatives

12:24 pm EDT, August 8th, 2011 — Moody’s cautious about U.S. deficit cuts plan

1:07 pm EDT, August 8th, 2011 — Losses Grow on European Markets

1:22 pm EDT, August 8th, 2011 — Bank of America stock hammered after AIG suit

1:24 pm EDT, August 8th, 2011 — “Jaws”

4:10 pm EDT, August 8th, 2011 — Gardiner: 10 key reasons why the Obama presidency continues to melt down

5:23 pm EDT, August 8th, 2011 — Deja Vu: Dow Crumbles 635 After Economic, Debt Fears Engulf Wall Street


So much for Obama and his lefty freaks.  “Done like dinner” comes to mind.

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  • Jack

    I saw a hint from the net this afternoon that “The One” was going to break his silence and address the masterbating masses regarding the downgrade. From what I’m getting now he appears to have “re-thought” the situation and will continue to “lead from behind”.

    Tea party influence get’s the credit.

    Who knew?




    I should have known. The man never shuts up. He was just running lateas usual.

    • Jean

      Saying the right things but as usual sound good but no details or meat about getting there any time soon: Still a great voice and good prompter reader. 😉

      Blame everything and everyone but himself.

      Every time he speaks the Markets go down because very few have full or even mediocre confidence in his leadership. In the past many Presidents could calm and reassure the Nervous Nellies and inspire ” hope and change ” …. sort of sad and ironic considering Obama’s hope and change campaign in the last election.

  • Jean

    Yes there are serious issues to be dealt with unsustainable Government dept and spending but I think the ” mood ” is ripe for real changes in the right
    ( pun/double meaning ) direction that may bring us back from the brink in time, assuming irrational panic doesn’t go too far.

    Not enough available cash to buy but avoiding panic selling at a great loss: Not rich, but no debts, own the house mortgage free, and the portfolio could lose 50% of it’s value and I would still be in good shape but not really happy about it.

  • Cy

    Hopefully the stock types out there are buy buy buying. You had a whole weekend to research the companies that had long term growth potential and you knew the markets were going to take a huge dive today – mostly for psychological / group-think reasons rather than rooted in any reality that hasn’t been true for at least 3 years.

    Not a stock guy myself, but the TSX ETF’s are looking mighty fine right now …

  • jt

    So, the TSX and DOW are crashing and burning. Stock prices reach new lows. Is the price of a GM or Ford or Chrysler vehicle dropping in unison? Price of gasoline dropping? Your power prices dropping? Cost of a civil servant dropping? What you pay for health care dropping? Food prices dropping? Nope.

    Well then, don’t worry, ’cause everything will get back to normal soon. Oil prices are down, interest rates haven’t gone through the roof and won’t if your local national government has a say so . Corporation balance sheets are better now than in 2008, some are flush with cash, the crooks are being flushed from the markets and from certain governments, at all levels.

    If you haven’t cut back on your spending (ie live within your means) then you’ll get whacked, which is what is hapening in the markets right now. Great buying opportunity