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WASHINGTON — As the stock prices of the big banks cratered on Monday, particularly for Bank of America Corp., pundits and industry observers began worrying that a second financial crisis was in the offing, including the possibility of the failure of a large financial institution.
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A downgrade of the U.S. government's credit rating is raising the question of whether some of the biggest banks may be next.
August 8
WASHINGTON — The Senate Banking Committee has begun gathering information about Standard & Poor's decision to downgrade U.S. government debt, according to a committee aide.
The aide said that while the committee has not yet decided whether it will hold hearings on the matter, no options are being ruled out.
The development raised the possibility that the rating agency will be called before Congress to answer questions about its decision to lower the nation's longstanding AAA rating.
Banking Committee Chairman Tim Johnson, D-S.D., on Monday issued a sharply worded statement criticizing Standard & Poor's downgrade of U.S. debt.
"In the minds of serious, reasonable, and informed individuals, there is no doubt that the U.S. will meet its debt obligations and we are seeing even more proof of that today," Johnson said, referring to the fact that yields on Treasury bonds fell on Monday in the midst of a steep decline in stock prices. "As the financial markets stumble, investors continue to regard Treasury debt as a safe haven in times of economic uncertainty."
"This irresponsible move by S&P may, however, have spillover effects that tax the American people by increasing interest rates on home loans, credit cards, and car loans, and by increasing the cost of finance for some state and local governments. I am deeply disappointed in S&P's decision to enter into the game of political punditry."
