The significant credit-market events of fall 2008 and the resulting loss of confidence prompted Standard & Poor’s Ratings Services to reassess our view of the creditworthiness of financial institutions globally. As a result, we believe that several factors will combine to change the face of the banking industry, including: increased regulation, consolidation of weaker entities, fundamental reconsideration of the “originate-to-distribute” model, adaptation to higher volatility, and higher losses for this economic cycle (see “How The Credit-Market Crisis Is Changing The World Of Banking,” published Nov. 25, 2008, on RatingsDirect).

Click here to read full article

Economic data were sparse this week. The weak overseas reports, however, show that the U.S. is doing better than its major trading partners. The current world recession is setting up a natural experiment between the countries that have moved more proactively, including China, the U. S., and Britain, and those that have held a more laissez faire approach, such as the Eurozone.

Click here to read full article

The U.S. corporate speculative-grade default rate has risen sharply this year, and we expect that it will reach an all-time high of 14.3% by March 2010. Historically, defaults have continued to escalate even after signs of economic recovery. This cycle will be no different. We expect the economy to bottom out in the third quarter of 2009, but default occurrences likely will be abundant past that time horizon.

Click here to read full article