As Euro Crisis Continues, Bank Downgrades, Credit Squeeze Signal Possible Return To 2008

As Euro Crisis Continues, Bank Downgrades, Credit Squeeze Signal Possible Return To 2008

The situation in Europe is hitting global credit markets, making it harder for companies and banks to secure loans. Investors are buying fewer corporate bonds, and banks are finding it more difficult to borrow from each other. On Thursday, as the European Central Bank again resisted pleas for it to rescue the eurozone, worries about a severe credit crunch along the lines of the 2008 crisis grew."In some ways this is part two of the U.S. financial crisis," said Srinivas Thiruvadanthai, an economist at the Jerome Levy Forecasting Center.Credit rating agency Fitch Ratings downgraded nine major banks on Thursday, including Goldman Sachs, Bank of America and Morgan Stanley. While acknowledging that the banks are in better shape now than in 2008, the rating agency cited vulnerability to the increased market turmoil stemming from "economic developments and regulatory challenges."