The European crisis has spread quickly over the last few weeks to global markets. The S&P 500 shaved 2.85% today and closed at its 52 week lows. The bigger news is that US banks have become a larger target of exposure rumors. Morgan Stanley has quickly grabbed the headlines with a fervor that trumps Bank of America:
To put Morgan Stanley’s credit spread in perspective, it is now wider than Italian banks. These spread levels indicate collapsing confidence in the US banking system that can become a self-fulfilling prophecy. With equity markets down so sharply and financial institutions in the gun sights again, I can only imagine that the Fed and the Treasury are looking at a new plan to calm the markets. The last thing that we need is the global financial crisis redux.