Turn On The Lights, Watch The Roaches Scatter, Part 30

And we've hit the 30 post mark on "Roaches Scatter" as Foreclosuregate rolls on and we get caught up on the week's news.  First, the credit ratings agencies are now openly talking about downgrading the major mortgage banks, starting with Fitch saying it could cut its ratings for BofA and Citi.

Fitch said its warning most affected Bank of America and Citigroup, because both companies "have benefited from support provided by the U.S. government."

Each bank took $45 billion in U.S. taxpayer-funded bailouts during the financial crisis, and have spent this year clawing back to sustained profitability. A downgrade from Fitch would make both banks face a new squeeze on their profits, analysts said.

"If you get downgraded, it costs you more to borrow money," said David Knutson, analyst with Legal & General Investment Management America.

Fitch could follow through on its warning within three to six months, but a downgrade would take on far more significance if the other two rating agencies followed suit, Knutson said.

In light of Foreclosuregate, you can count on that happening sooner rather than later.  And speaking of down the road, it's really the complete lockup of the housing market that's going to do the most damage to the economy as home prices will continue to fall.  Here's Gary Shilling on CNBC talking a 20% drop in home prices from where they are now, which would basically double the number of underwater mortgages to some 40% of homeowners.



Pretty grim stuff all around, folks. There will be no recovery.