Flloyd Noris points out in his latest New York Times column – that not only is the overall loan quality at American banks the worst in at least two decades, but their quality is deteriorating at the fastest pace ever. A report released this week by the FDIC indicates that institutions are struggling with an unprecedented volume of old-fashioned loans going bad.
From The NYT: 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.
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Virtually the only encouraging news in the report was that the banks’ loan portfolio might be worsening more slowly than it was.
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[T]he percentage [of loans] 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.
Mr. Norris also noted that problems stretch across nearly every category of loan.
Over all, 8.77 percent of real estate loans are troubled, but some types of such loans are in far worse shape than others. Construction and development loans are in the worst shape, with 17.68 percent of loans troubled.
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