Fitch may downgrade dozens of banks across the board; U.S. banking sector may face renewed turbulence, and U.S. bank stocks have plunged across the board—what information deserves attention?

I just checked the last time the U.S. sovereign credit rating was downgraded: on August 6, 2011, S&P announced its downgrade, and by August 12, S&P had downgraded Fannie Mae, Freddie Mac, major banks, insurers, and trust companies. By contrast, this time around, Fitch downgraded the U.S. sovereign rating on August 1; on August 3, it downgraded Fannie Mae and Freddie Mac; and as of today, Fitch remains in the process of 'considering' downgrades for multiple banks—a noticeably slower pace. Moreover, given that Fitch held meetings with the U.S. Department of the Treasury prior to the downgrade, it is reasonable to assume that operational arrangements regarding the downgrade were discussed during those meetings. Thus, we have grounds to believe Fitch’s deliberate delay is coordinated with the Treasury—effectively granting these institutions time to raise funds. Compared with the 2011 downgrade, back then the federal funds rate had already been cut to 0.25%, making borrowing virtually costless; financial institutions therefore aggressively leveraged debt to weather the debt crisis. Today, however, interest rates have surged to a high of 5.5%, significantly raising borrowing costs. We can reasonably anticipate that institutions facing downgrades will find it extremely difficult to borrow—and their risk of default will rise sharply. Slowing the pace of downgrades allows these institutions to borrow in advance—securing as much funding as possible before the downgrade hits. If they cannot borrow now, an imminent downgrade could force them into immediate bankruptcy.

Last night U.S. bank stocks plunged—was this a dress rehearsal for a market crash?

In 2025, legislation has been enacted establishing a dedicated 'Crisis Vice Chair' position. Once the President declares a national emergency, this official may act unilaterally—buying stocks, bonds, or ETFs—for up to three months, subject only to post-hoc reporting to Congress. Quantitative Easing (QE) / Quantitative Tightening (QT)—'central bank stepping directly into the market': Should asset fire sales occur, the Federal Reserve can print unlimited money to purchase Treasuries and mortgage-backed securities (MBS), thereby suppressing interest rates and buying banks time to recover gradually. Once the crisis subsides, QT would be deployed to slowly shrink the balance sheet. 3. Actions currently underway (visible in 2025): • With the commercial real estate (CRE) loan maturity wave approaching, the FDIC and the Fed have already intensified stress-test scenarios, requiring banks to hold an additional two percentage points of capital; • Conducting 'special health checks' on regional banks—with particular scrutiny on institutions highly concentrated in CRE loans—and issuing mandatory 'rectification orders' upon identifying vulnerabilities; • Congress is debating raising the FDIC insurance limit from $250,000 to $500,000 to reduce the likelihood of small-scale bank runs; • The Treasury has quietly reserved another $20 billion in the Exchange Stabilization Fund (ESF), ready to inject preferred equity into 'systemically important' banks at any moment; • The New York Fed publishes daily figures on overnight reverse repurchase (ON RRP) usage; if volumes suddenly decline, it immediately releases short-term liquidity to prevent money market funds from 'breaking the buck' and triggering mass redemptions. Plainly put: America now possesses both routine 'health checkups' and an emergency 'intensive care unit.' If a bank truly collapses, regulators can administer a 'cardiac stimulant' first, then rush it into surgery. But stronger medicine brings greater side effects: more monetary excess, heightened asset bubbles, and increased pressure on the U.S. dollar. Hence, regulators constantly warn: 'Fasten your seatbelts—don’t actually crash! Because if you do, everyone may go down together.' VI. How does a U.S. bank failure affect us? While the fire burns on Wall Street, the smoke chokes us too. Ordinary people who proactively don protective 'masks' and tighten their 'seatbelts' can minimize coughing fits. 1. What’s the actual impact on us? • Shrinking export orders: A U.S. bank collapse tightens corporate lending → American consumers rein in spending → Chinese exports—especially toys, apparel, and electromechanical goods—see order cuts first. Factories in Guangdong and Zhejiang report declining order backlogs and reduced overtime. • Foreign capital flight: Bank stocks in A-shares and H-shares get hammered. As the dollar suddenly strengthens, some foreign investors 'sell A-shares to rush home and fight fires in the U.S.,' dragging down share prices—particularly in foreign-investor-heavy sectors like banking and real estate. Due to heavier reliance on dollar financing, H-share volatility exceeds that of A-shares. • Shrinking dollar-denominated assets: A large portion of China’s foreign exchange reserves consists of U.S. Treasury and agency bonds. Their market value falls amid banking turmoil—akin to cracks appearing in our national 'basket of foreign eggs.' • Wild currency swings: Surges in risk-aversion sentiment trigger sharp dollar appreciation and short-term RMB depreciation, raising import costs for infant formula, crude oil, and semiconductors—and indirectly pushing up domestic prices. 2. What should ordinary people do? • Avoid 'unhedged dollar' assets: Unless absolutely necessary, avoid converting all personal savings into U.S. dollar time deposits or U.S. Treasury ETFs. If allocating to dollar assets, keep exposure below 20% of total household financial assets. • Overweight consumer staples and utilities in A-shares; underweight banks and real estate. During banking crises, shift portfolio weight toward 'daily necessities + water/electricity/gas' sectors—industries less vulnerable to external shocks—while reducing positions in highly leveraged property stocks and regional banks. • For export-oriented enterprises: Lock in exchange rates early, diversify markets, and minimize supplier financing.

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