Wednesday, February 25, 2009

Banking Situation in the US Continues to Decline

For those out there that think the economy will turn around in the 2nd half of this year, it will require a much healthier banking system then we have and things at the banks continue to deteriorate. Personally, I think we will be lucky to be of the current recession by mid-2010. As an aside the article below from Market Watch is validated by what I am hearing from contacts at the banks. Text in bold is my emphasis.

Bank loans were going bad at a faster pace in the fourth quarter of the year, forcing banks to charge-off a record $34.5 billion in delinquent loans, the Federal Reserve reported Tuesday.

The seasonally adjusted delinquency rate for all bank loans rose to 4.6% in the fourth quarter from 3.7% in the third quarter. That's the highest delinquency rate since 1992 in the aftermath of the savings & loan crisis. A year ago, the delinquency rate was 2.4%.

Delinquencies were growing faster last quarter than at any other time since the Fed started collecting the delinquency data in 1985.

For residential real estate, the delinquency rate rose to a record 6.3% in the fourth quarter from 5.2% in the third quarter and 3% a year earlier.

Consumer credit card delinquencies rose to a record 5.6% from 4.8% in the third quarter.
Delinquencies for commercial real estate loans increased to 5.4% in the fourth quarter from 4.7% in the third, and double the rate a year earlier.
(The next she to drop in 2009.)

The charge-off rate increased to 1.9% from 1.5% in the third quarter, with banks charging off a record $35.5 billion, up from $24.2 billion in the third quarter and $13.9 billion in the fourth quarter a year earlier.

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