By Kitty J. Lin, Attorney at Law<\/p>\n
On Friday, August 5, 2011, Standard & Poor\u2019s downgraded the U.S. Treasury Debt from an AAA rating to an AA+ rating.\u00a0 S&P indicated that one of the major reasons why they decreased the rating was due to Congress\u2019 plan to reduce the country\u2019s debt did not satisfy S&P\u2019s standards for stabilizing our country\u2019s economic situation.\u00a0 S&P\u2019s explanation seems hypocritical given that S&P was one of the reasons we are in this financial crisis.\u00a0 S&P had given high credit ratings to companies that did not deserve it and that was a factor that sank our economy.\u00a0 A lot of companies that were issuing subprime mortgages were enjoying the effects of being in S&P\u2019s favor until the bottom dropped out from underneath them when the real estate bubble burst.\u00a0 This led to millions of Americans seeking protection from the bankruptcy court.<\/p>\n
One of the biggest effects of the downgrade was stock volatility.\u00a0 Once news of the debt downgrade hit, stocks tumbled drastically on Monday following the debt downgrade.\u00a0 Consumers were panicked, and a lot of them flocked to U.S. Bonds, which is the safe haven in the world of investments.\u00a0 On Tuesday, August 9, 2011, the Federal Reserve expressed their doubts about the economic recovery and promised that they were going to keep the federal funds rates at 0 to 1\/4% until mid-2013.\u00a0 This is the longest commitment period the Federal Reserve has ever made to keep the rates low.\u00a0 The federal funds rates are what banks pay to borrow money.\u00a0 Thus, theoretically, the lower rates the banks have to pay to borrow money the lower the rates consumers would have to pay to borrow money from the banks.\u00a0 This is good news for consumers facing a credit crunch.\u00a0 Hopefully consumers will be able to obtain better rates or refinance their existing debts to prevent bankruptcy.<\/p>\n
One of the silver linings from this crisis is that mortgage rates will decrease or remain low.\u00a0 Now is the perfect time to buy a home or refinance your loan.\u00a0 Home values are still low, and now mortgage rates are also low.\u00a0 If your financial situation allows you, now is the time to take advantage of the crisis and put yourself in a better position for the future.<\/p>\n
Unfortunately, consumers that wish to just keep their money in their savings account with their bank will not see much increase.\u00a0 In fact, the savings rate is practically non-existent. \u00a0Currently many people are trying to keep their money safe in banks.\u00a0 Demand for loans still remains low, even with attractive low rates.\u00a0 Most consumers currently do not have the ability to capitalize on the low rates; most of America is trying to survive on a daily basis and are living from paycheck to paycheck, never knowing if they will still have a job the next month.\u00a0 Consumers in this group are essentially bankrupt and are in danger each month of defaulting on their debt payments.\u00a0 Consumers that are in this group would not be affected much by the debt downgrade, as they normally do not have the credit to take advantage of the low mortgage rates or the available equity in their homes to refinance their loans.<\/p>\n
If you need additional information about municipal bankruptcy cases or bankruptcy in general, you may contact one of our bankruptcy attorneys<\/a> or bankruptcy lawyers<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" On Friday, August 5, 2011, Standard & Poor\u2019s downgraded the U.S. Treasury Debt from an AAA rating to an AA+ rating. S&P indicated that one of the major reasons why they decreased the rating was due to Congress\u2019 plan to reduce the country\u2019s debt did not satisfy S&P\u2019s standards for stabilizing our country\u2019s economic situation.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/314"}],"collection":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/comments?post=314"}],"version-history":[{"count":7,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/314\/revisions"}],"predecessor-version":[{"id":1026,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/posts\/314\/revisions\/1026"}],"wp:attachment":[{"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/media?parent=314"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/categories?post=314"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.westcoastbk.com\/blog\/wp-json\/wp\/v2\/tags?post=314"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}