Inadequate Loan Loss Reserves At Numerous Minnesota Banks

[RedEarth]

At Minnesota banks, bad loans are piling up much faster than the amount of money being set aside to cover them.

By CHRIS SERRES, Star Tribune

For years, financial experts and regulators have been warning banks to prepare for a dark day when a sudden collapse in real estate values would trigger a sharp rise in loan losses.

Now that day has arrived, and the question remains: How well did Minnesota banks heed the warnings?

Bad loans are rising at a rapid clip, and banks in the state are not setting aside as much money to cover expected loan losses as is the United States banking sector as a whole, according to data from the Federal Deposit Insurance Corp. (FDIC), which regulates about 5,100 banks.

Despite repeated warnings of economic trouble ahead, banks in Minnesota have failed to keep pace with the rise in bad loans. Among those banks, the ratio of past-due and nonaccrual loans -- or loans for which payment is in doubt -- as a percentage of total loans rose 50 percent since 2006, while the reserves to total loans ratio remained virtually unchanged.

http://www.startribune.com/business/39229362.html?page=1&c=y

[jwirr]

1. Look who they have for a leader in this state: plenty.

[The Brethren]

2. Bad loans, poor judgement, and lousy

money management spell chaos and losses. It isn't that difficult to figure out.

[tech3149]

3. Isn't that the risk of fractional-reserve banking?

They played the money they had on questionable investments or leveraged their assets at an unrealistic ratio. Either way they played fast and loose and it's up to us via FDIC to cover their asses. I say let them take the fall and write off the debts they owe and insure the true assets they were working from.

I'd also suggest taking the names of all the major players in the companies and make sure they never get a job that puts other peoples money at risk.

[The Brethren]

4. I'll second that!