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Troubled Bank Loans Hit A Record High

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Troubled Bank Loans Hit a Record High

OVERALL loan quality at American banks is the worst in at least a quarter century, and the quality of loans is deteriorating at the fastest pace ever, according to statistics released this week by the Federal Deposit Insurance Corporation.

The report highlighted that even as the government and major banks have scrambled to deal with the impaired securities the banks own, the institutions have been plagued by an unprecedented volume of old-fashioned loans going bad.

Of the entire book of loans and leases at all banks — totaling $7.7 trillion at the end of March — 7.75 percent were showing some sign of distress, the F.D.I.C. reported. That was up from 6.9 percent at the end of 2008 and from 4.1 percent a year earlier. It also exceeded the previous high of 7.26 percent set in 1990 and 1991, during the last crisis in American banking.

The F.D.I.C. has been collecting the figures since 1984.

Virtually the only encouraging news in the report was that the banks’ loan portfolio might be worsening more slowly than it was. While the increase of 3.65 percentage points in a year is the highest ever, the quarterly rise was smaller than in the fourth quarter of last year.

The figures, as shown in the accompanying charts, include loans that are more than 30 days behind in payments, a category that will include some loans that catch up and become current. But the percentage that are at least 90 days overdue, or on which the bank has stopped accruing interest or written off, is also higher than at any time since 1984.

As recently as mid-2006, the proportion of troubled loans was at a historic low, and bank regulators were confident that the institutions were well capitalized and could survive any likely economic downturn. They were wrong, it turned out.

The problems stretch across nearly every category of loan, and every size of bank, although the loan problems appear to be somewhat less severe at smaller banks.

Seems our American cousins are suffering on all fronts. A complete rout of the old financial system is under way.

What's next for the Yanks?

And we are far more indebted here! What's next for us!

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Troubled Bank Loans Hit a Record High

Seems our American cousins are suffering on all fronts. A complete rout of the old financial system is under way.

What's next for the Yanks?

And we are far more indebted here! What's next for us!

Shut it down, martial law, plausible solutions that are actually facism etc

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7% in trouble....that could account for ALL the profit this year.

this is a danger with low interest rates, it only takes a small amount of defaults to wipe out all the profit.

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Troubled Bank Loans Hit a Record High

Seems our American cousins are suffering on all fronts. A complete rout of the old financial system is under way.

What's next for the Yanks?

And we are far more indebted here! What's next for us!

It's a non-story. Banks will still amke profits and not go bust even if they sustain 50% default rate. Hamish told me last night.

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7% in trouble....that could account for ALL the profit this year.

this is a danger with low interest rates, it only takes a small amount of defaults to wipe out all the profit.

Not sure the margins (read: PROFIT) are that low... Fed rate might be approx. 0.5%, but average loans are over 5%. That is a decent margin.

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7% in trouble....that could account for ALL the profit this year.

this is a danger with low interest rates, it only takes a small amount of defaults to wipe out all the profit.

Hehe whats the betting the banks make bumper profits, buying back the dodgy loans for a 1c in the 1$ from the gub'ment.

Cheers! Champagne all round! :lol:

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Not sure the margins (read: PROFIT) are that low... Fed rate might be approx. 0.5%, but average loans are over 5%. That is a decent margin.

not if 7% run into trouble

a quick calc reveals a 2% capital loss.

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Not sure the margins (read: PROFIT) are that low... Fed rate might be approx. 0.5%, but average loans are over 5%. That is a decent margin.

But what happens when we get Option ARM and Alt-A default waves starting next year? We will need bailouts possibly exceeding that from sub-prime, with already record levels of debt and unemployment approaching 10% in the US.

We are approaching a prefect storm; High unemployment, the prospect of rapidly rising rates to fund further state debt and the possibility of either bond strikes or state default...

Cartman, look at your figures... if 7% of the loans are in default, that means only around 93% of the 7.7 Trillion is being paid at 5% = 365 Billion Profit. If we see net write downs of 5% of the total loans this year (conservative) we are looking at net LOSSES of 385 billion. The Shocking stats are the 17% of Commercial paper that currently is in default...

Of course, this ignores profits made from other banking arms such as investment etc.

Lets not forget though the banks will also be paying out interest to depositors as well....

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Not sure the margins (read: PROFIT) are that low... Fed rate might be approx. 0.5%, but average loans are over 5%. That is a decent margin.

Would be if inflation wasn't 12%

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