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Financial Groups Hit By Surge In Loan Losses

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The US financial sector’s losses on large loans exploded over the past year, exceeding the combined losses since 2001, with hedge funds and other members of the “shadow banking system†hit the hardest, official figures revealed on Thursday.

Regulators’ annual review of “shared national credits†– loans larger than $20m shared by three or more federally regulated institutions – highlighted the toll taken by the crisis on financial groups outside the traditional banking sector.

More than one in three dollars lent by non-bank institutions such as hedge funds, securitisation vehicles and pension funds, went sour, according to the figures, compared with 11.5 per cent for US banks.

The results will increase fears that, in spite of a recovery in the shares and balance sheets of many banks, the epicentre of the crisis has moved to the hedge funds and investors that gorged on cheap credit in the run-up to the turmoil.

The importance of these non-bank institutions was underlined by the review’s finding that they held 47 per cent of problem loans, in spite of accounting for only 21.2 per cent of the total loan pool.

Overall, the US financial sector’s losses on loans in early 2009 reached a record of $53bn, almost triple the previous high in 2002.

The number of loans edging into the danger zone has also surged.

Some 15 per cent of the $2,900bn SNC portfolio was classified as “substandard†– the second of the four categories used by regulators – and worse, up from 5.8 per cent in 2008.

The pace at which loans got into serious trouble accelerated significantly. The dollar volume classed as “doubtful†or loss-making increased 14-fold over the past year to $110bn. “Doubtful†loans are so weak that collection or liquidation is highly improbable.

The review is conducted each year by the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

They look at a sample of banks’ and non-banks’ shared loans to check that they are marking them in the same way.

The losses just keep mounting and the presses just keep printing.

Losses are just so easy to fix, why didn't anyone think of this before?

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The losses just keep mounting and the presses just keep printing.


What a surprise!!! :rolleyes: NOT.

Just the tip of the iceberg...

What do people expect when it became "NORMAL" for the "price" of a roof over your head is such that the only option was/is a LIAR LOAN......? :rolleyes:

Edited by eric pebble

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