Moodys downgrades 28 Spanish Banks

Friends, We are now in the end-game. Moody's downgraded 28 Spanish banks. A dozen lenders were lowered to junk status. Furthermore, Moody's warned that further downgrades were on the way. Europe is on a downward spiral.

Moody’s said that the reduced creditworthiness of the Spanish sovereign, as captured by the agency’s three-notch downgrade of Spain’s government bond rating, implies a weaker credit profile for Spanish banks. This results from the banks’ multiple linkages with the sovereign, including (i) the impact of the government’s financial position on the domestic economy; and (ii) the large exposures of most banks to their domestic government and to other counterparties that depend on the credit strength of the government.

The ship is sinking and it is time to roll out that old metaphor about the titanic. Everyone has to figure out whether they are sitting on the ship, or are they on a lifeboat.