In response to notehound's post of the proposed FASB rule change (forcing banks to recognize and allocate capital for bad loans and losses from the time of origination and after), I took a look at a favorite (though obscure) metric from the Federal Reserve, Assets at Banks whose ALLL (allowance for loan and lease losses) exceeds their Nonperforming Loans. I have been watching this chart for years. http://research.stlouisfed.org/fred2/series/LLRNPTThe data series, which used to cover 1980 and after, has been truncated by the Federal Reserve! It now starts in Q12010!!!OMG!!!The original series showed how banks always had 90% or above allowance for loan and lease losses until the 2008 financial crisis. It then dropped like a stone to 15%. It has been gradually struggling up since then and is now 35%.The old data series showed how pathetically inadequate the reserves are and how slow the recovery (actually, non-recovery since about 2/3 of loan and lease losses are not covered!).The new series makes the "recovery" look significant.I'm amazed that the Fed did this -- partly because it's so dastardly and partly because nobody ever talks about this series except me.Wendy
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