Moody's may drag down bank stocks further

Moody's is probably not done downgrading banks. It appears to be operating on the theory that even the strongest U.S. banks will be hit by more losses and need more reserves as the economy goes to hell more each day. That could cause the largest U.S. financial firms to have to raise even more capital.

According toBloomberg, the key to Moody's thinking is that "Ten of 12 Fed district banks reported worsening conditions in their regional economies and respondents didn't expect a 'significant pickup' until late 2009 or early 2010." The banks that the credit agency is watching are JPMorgan (JPM), Wells Fargo (WFC), and Bank of America (BAC).