So what?...Why worry? SVB, Signature, First Republic depositors were protected by the likes of the BFTP etc. weren't they?
This is the official position held by the Alfred E. Neuman institute for Fiscal Stupidity.
While I agree that the FDIC will bail out depositors—even above the 250K limit as we have seen in the past year—there is a risk for bank stock (equity) holders.
That is the basis for the lower rating.
Most banks are technically insolvent if they had to liquidate everything immediately. In fact many have commercial real estate liability alone that substantially exceeds their total equity.
