[Marxism] Recovery?

S. Artesian sartesian at earthlink.net
Fri Sep 25 14:25:14 MDT 2009


Speaking of recovery... did anyone look at the Fed's "Shared National Credit 
Review"?  This is the Fed's annual review on the quality of the loans issued 
by the financial sector in amounts greater than $20 million, and banks and 
non-bank financial entities like hedge funds, spun-off structured investment 
vehicles, etc.

The news is hardly good-- from the executive summary of the report:
Executive Summary

The interagency Shared National Credit (SNC) Review for 2009 found credit 
quality deteriorated to record levels with respect to large loans and loan 
commitments held by U.S. bank organizations, foreign bank organizations 
(FBO), and nonbanks such as securitization pools, hedge funds, insurance 
companies, and pension funds. Total loss of $53 billion identified in the 
2009 review exceeded the combined loss of the previous eight SNC reviews and 
nearly tripled the previous high in 2002. The declining credit quality is 
attributed to weak economic conditions affecting most industries and weak 
credit underwriting standards leading up to 2008.

Credit quality deteriorated across all entities, but nonbanks held 47 
percent of classified assets in the SNC portfolio, despite making up only 
21.2 percent of the SNC portfolio. U.S. bank organizations, which make up 
40.8 percent of the SNC portfolio, held 30.2 percent of the classified 
assets. FBOs, which make up 38.0 percent of the SNC portfolio, held 22.8 
percent of the classified assets.

Other key findings from the 2009 SNC review include:

  a.. Criticized assets, which include SNCs rated special mention, 
substandard, doubtful, and loss, reached a record level of $642 billion and 
represented 22.3 percent of the SNC portfolio compared with 13.4 percent in 
2008. Total credit commitments of nearly $2.9 trillion increased by $92 
billion, or a modest 3.3 percent.
  b..
. Classified assets, which include SNCs rated substandard, doubtful, and 
loss, rose to $447 billion from $163 billion in 2008 and represented 15.5 
percent of the SNC portfolio compared with

5.8 percent in 2008. Classified dollar volume increased 174 percent from 
2008.

  a.. Credits rated special mention declined to $195 billion from $210 
billion and represented 6.8 percent of the SNC portfolio, compared with 7.5 
percent in 2008. A significant number of SNCs rated special mention in 2008 
migrated to classified status (substandard or worse) in 2009.
  b.. The severity of criticism increased, with the volume of SNCs 
classified as doubtful and loss rising to $110 billion, up from $8 billion 
in 2008-a 14-fold increase. In addition, nonaccrual loans increased nearly 
eight times from $22 billion in 2008 to $172 billion in 2009. Nonaccrual 
loans included $32 billion classified loss and $56 billion classified 
doubtful.
  c.. The distribution of credits across entity types-U.S. bank 
organizations, FBOs, and nonbanks- remained relatively unchanged. U.S. bank 
organizations held 40.8 percent, while FBOs and nonbanks held 38.0 percent 
and 21.2 percent respectively. Nonbanks continued to hold a disproportionate 
share of classified assets compared with their total share of the SNC 
portfolio. Nonbanks held 47.0 percent of classified assets and 52.0 percent 
of nonaccrual loans. Federal Deposit Insurance Corporation (FDIC)-insured 
institutions held only 24.2 percent of classified assets and 22.7 percent of 
nonaccrual loans.
  d..
. Criticized volume was led by the media and telecommunications industry 
group with $112 billion, finance and insurance with $76 billion, and real 
estate and construction with $72 billion. These three industry groups also 
represented the highest shares of criticized credits, with 17.3 percent,

11.7 percent, and 11.2 percent of criticized credits in the SNC portfolio, 
respectively.

  a.. The review identified significant deterioration in credit quality of 
leveraged finance credits with these loans representing more than 40 percent 
of the dollar volume of total criticized assets. About 72 percent of the 
dollar volume of the 50 largest leveraged finance SNCs were criticized, 
which represents one-third of all criticized assets. .

Full report can be accessed at: 
http://www.federalreserve.gov/newsevents/press/bcreg/20090924a.htm 





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