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Troubled assets continue to threaten banks

A bank regulator arrives to close Midwest Bank on May 14, 2010 in Melrose Park, Illinois.

From the peak a couple of years ago, when bank failures totaled 157, the number that went belly up this year was down to 51. But that's still more than normal. Is trouble still lurking in financial vaults? 

"I think it's continuing problems. I don't think it's new loans they're putting on their books, but I think it's banks that had troubled assets or non-performing assets that are still a drain on the operations of the banks," says Randy Dennis heads DD&F consulting, which advises troubled banks.

Regulators have held out hope those bad loans might recover some value, but it's still not happening in some of the hardest-hit places.

"Things are improving somewhat across the country, but I don't know that I would say we're having a robust recovery," says Dennis.

"The economy just isn't growing strong enough to save those banks," says financial industry consultant Bert Ely. According to Ely, as time drags on, regulators could start feeling more pressure to put what he calls the "zombie banks" out of their misery.

"Given that the regulators do seem to be dragging their feet, you know, if they have a change in attitude, we may see more failures next year," he says.

Ah, if only those old bad loans could be forgot, and never brought to mind.

About the author

Bob Moon is Marketplace’s senior business correspondent, based in Los Angeles.
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Somehow the US and Europe has allowed a political class to take leadership who sees America as a third world nation and not a first world nation. One cannot suspend Rule of Law and have a functioning democracy and we see a functioning economy. Obama failed the people who entrusted him with the Presidency by not bringing back tens of trillions in corporate fraud collected over these few decades......trillions just from this mortgage fraud. So all of these toxic assets as corporate media likes to call fraudulent loans still sit in bank accounts and government agencies like Fannie and Freddie rather than simply be written off by banks.

The reasons the fraudulent debt is allowed to sit is that they cannot dump so much of it onto the taxpayer in one fell swoop. They are working on having the public pay off the fraud one way or the other. The policy released by the Obama Administration that allows foreclosed property to be bundled and sold to investors is just such an outlet as the same people who created the fraudulent loans are now buying them back at huge profits yet again. They are waiting for all of these properties to hit foreclosure so as to get rock-bottom prices and have huge blocks of rental property.

Remember, they are doing this with fraudulent loans that simply should have been written down or written off. This is not only institutionalizing wealth inequity through fraud, it is keeping the US economy stagnant and unemployment high. You cannot have a functioning economy built on a criminal corporate system.

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