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Remember when America's regional banks would be the death of us? We survived, but they're still a mess.

Moody's downgraded the credit ratings of 10 small-to-mid-sized US lenders as the week began, while putting six other larger institutions under review. As if the bank runs and crashes this past spring weren't already enough to endure.

It's Spreading

Earlier this year saw the collapse of Signature Bank, First Republic Bank, and Silicon Valley Bank, due to plenty of contributing factors -- sharply rising interest rates, devalued commercial real estate assets, and little cash on hand. And no matter how much Washington tried to restore confidence in the sector, nervous customers withdrew deposits and sought out bigger, more established lenders as a new home for their money. Now Moody's says another crop of regional banks are suffering from the same problems.

Moody's downgraded the ratings of lenders including Commerce Bancshares, BOK Financial, M&T Bank, and Old National Bancorp. Half a dozen bigger banks were placed under review for a downgrade, including Bank of New York Mellon and US Bancorp. Moody's cited the increasing risks to profitability due to weakening economic conditions, specifically their impact on commercial real estate portfolios.

So what will change for loyal customers?

  • The normal transactions that have been tough since the pandemic and the onset of rising interest rates -- securing a loan, getting approved for a credit card, making large purchases -- could get even tougher.
  • Financial advisor Ted Jenkin told The New York Post that there is "a potential sell off in the treasury markets, higher interest rates on mortgages and credit cards, a mild recession in 2024, and companies may have to tighten their belt leading to higher unemployment."

America (You're Freaking Me Out): Just last week, the US government faced its own financial downgrade, after Fitch lowered its credit rating to a grade of AA+, citing a "steady deterioration in standards of governance." The move got pushback from federal officials and others on Wall Street who have argued the rating is based on old data and doesn't reflect a recent bipartisan agreement to raise the debt ceiling and avert a crippling default. But if you're still nervous about the stability of US financial institutions, the mattress industry has yet to be downgraded.