website for article http://money.cnn.com/2009/10/29/news/banks.losses.fortune/index.htm?postversion=2009102914
Allen James
Article Analysis
Do banks have something to hide?
The banks have taken some lumps since the economy went bad. But some believe their biggest headaches are yet to come. The pace at which U.S. commercial banks are adding to their loan loss reserves has slowed this year, while loans continue to go bad at a brisk pace. Despite the optimism of lenders like Wells Fargo (WFC, Fortune 500), some observers warn that banks aren’t socking away enough for a rainier day. The disconnect is particularly acute in commercial real estate, where lenders are facing a surge of defaults on commercial mortgages and construction loans made when prices were much higher and demand for space much stronger. Banks have been recognizing commercial real estate losses slowly, even though the high season for defaults isn’t expected to arrive until next year. That’s not the only problem. Ill-defined or inconsistently applied rules for valuing securities and handling loan modifications can make it hard to say how healthy banks really are, from Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500) on down.
I think if they are hiding something they should come on out with it. They don’t have the right to be hiding things from the people who bank with them. Some banks aren’t putting enough away but that is their choice, if they believe nothing will go wrong then they will try and keep it perfect. If they are not able to pay for loans then they should probably stop giving them out. The real estate prices are dropping and if they are giving out more loans then they will be losing money because their loans are taking longer to be paid for.
