The recent credit downgrade of the US has hit the banking sector pretty hard, as market turmoil causes some unfortunate waves for quite a few businesses in the wake of the overall economic conditions piled on top of the news of inevitable credit difficulties soon to come.
The banking sector tanked, taking hits as much as around 13% at Regions and SunTrust, and 10% for several others. Though much of the difficulty is stemming from the temporary, reactionary measure of investors pulling back due to atrocious news, though in many cases the bad news is indicative of something far more systemic that will likely keep the markets pessimistic for the near future.
Bank of America, for example, is being sued for $10 billion by AIG for mortgage fraud, while other banks such as Wells Fargo are under investigation for other illicit practices. Any bad news (for the banks) on this front will likely cause some damage to the stock and the business; though of course, it will only be good news for consumers, homeowners, and, more likely, the broader economy. But banks will have at least something to worry about.
On top of the mortgage market allegations, the dual provisions of the Dodd-Frank bill and the swipe fee debacle will at least hit their bottom lines to some degree, especially the latter, after which that wealth will transfer to the small businesses who will be paying less for such “services.”
Because mortgages and other loans composed a rather significant portion of revenue for many banks, the collapse or retreat of those markets will leave them scrambling to find other ways to make money in the meantime, which has led Bank of America to sell off its assets to other banks, when just a few years ago it was reporting enormous profits. The boom and bust cycle is hitting many institutions quite hard, and without having planned for such market conditions ahead of time, it is unlikely that the banking sector will recover quickly.
On the other hand, other banks, in particular Toronto-Dominion, have been expanding in the meantime, buying up regional banks, credit card accounts, and other assets while American banks flail for profitability. It is likely they will become a rather strong investment when those assets start picking up steam once the recovery begins. It will happen sooner or later, after all.
What this means for consumers is likely positive; banks will be placed under the conditions of the new financial reform package, which, like everything else passed under the current administrative climate, has been watered down; but nevertheless it will be at least slightly less likely to see the same sort of obscene lending practices that landed American banks in such a mess. And if they were to avoid such problematic lending in the future, it will likely be better for them as well. The banks will actually stand to benefit from such a condition as they were quite clearly the ones hardest hit with tanking revenues, mortgage allegations and multi-billion dollar lawsuits. But of course, we can expect them to fight such responsible legislation every step of the way.
![[Valid RSS feed]](http://www.world-class-articles.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites
