A newly released analysis provided to the U.S. government reveals that over 8,000 banks in the country reported a 149 percent increase in their troubled assets in 2008. This was mainly due to bad loans, including payday loans, and foreclosures.
Most banks remained healthy but 163 closed out 2008 with troubled loans exceeding capital, an increase from just 13 in 2007.
MSNBC.com and the American University Investigative Reporting Workshop analyzed Federal Deposit Insurance Corp. data to arrive at these conclusions. The groups found that out of every ten banks, seven were not as well-prepared to endure potential loan losses in 2008 than they were in 2007.
Calculation of the troubled asset ratio of each bank served as the basis for this claim.
Much attention has been placed on large banks but the analysis reveals that the problems were widespread in the industry as of 2008. This year, MSNBC.com will publish information regarding the 400 largest U.S. banks and banks with high ratios for troubled loans.
The group at American University created the BankTracker Web site to provide details regarding the financial health of all U.S. banks.
Both moves are opposed by the American Bankers Association. It feels that a single figure is unable to capture the complexity of a financial situation at one bank, which changes rapidly. If the public is unprepared to handle this information, an unwarranted run on a bank could result due to consumers misunderstanding the figures.
The Independent Community Bankers of America represents 5,000 banks, the majority of them small. President and CEO Camden R. Fine does not oppose publishing the information because he sees no reason for concern.
He believes that about 120 banks will fail this year, making the two-year total about 150, much less than the 2,500 banks that failed during the agriculture lending crisis of 1984 to 1992.
[...] U.S. Tested Subjects Saw Poor Loans Increase 149 Percent [...]