This article explains why Moody's downgraded the credit ratings of two of France's largest banks. The french government said that it would not permit its largest banks to fail and it said that the downgrade was less than what some expected. The downgrades reflect concern about the banks exposure to sovereign debt that has declined in market value.
In response, the euro zone agreed to purchase some sovereign debt. This presents concerns in Germany which may face higher borrowing costs by backing up the risky sovereign debt.
US Treasury Secretary Geithner will participate in discussions with his peers in Europe to discuss potential responses that might mitigate the risk of contagion. This reflects exposure that US banks might have in Europe.
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