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Bad Loans Remain Well Above Precrisis Levels

Even though unemployment is shrinking, wages have fallen over the past seven years since the Great Recession of 2007.  Banks are struggling to make new loans to a smaller pool of high credit rating holders.  The bad debts that limp along keep banks from recovering and from lending to the average Joe with a credit score of 621 or higher.  

Experts are worried.  “The banking system and the economy would have recovered faster if there had been more emphasis on disposing bad assets rather than managing them. It has distracted a lot of organizations,” said Jon Winick, chief executive at Clark Street Capital.

Bankers are finding it easier to hold onto bad loans because of the continued artificially low interest rates and funding costs.  They are hoping to receive payment now and let real estate values creep upwards. “The rates have been so low, so it costs basically nothing to carry nonperforming assets,” Dennis said. “We are behind in working through these. We will find ourselves in trouble if we don’t have some progress before rates go up,” said Randy Dennis, president of DD&F Consulting.