Wade...banks....the "illusion" of profits....
from an article in Forbes "While BofA has doubled its loan loss reserve, nonperforming assets -- loans that are no longer producing income as borrowers fall behind on payments -- have more than tripled, reflecting the weakening economy and the acquisition of troubled Countrywide and Merrill Lynch.
As a result, BofA's loan loss reserve now covers just 121% of its nonperforming loans -- down from 203% a year ago.
That means the bank has a thinning cushion just as the industry braces for rising losses on commercial and industrial loans, as well as continuing declines in residential real estate."
IMO, They aren't prepared for increasing defaults on commercial, credit card, and car loans. Unless unemployment rebounds (which is won't), the default rate on quality loans will increase further causing the cycle to continue. The real risk is then NO ONE will believe the banks when they report because they already padded their numbers this quarter with b.s. And when no one believes the numbers, panic continues.
