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Banks May Reach Point of No Return as Toxic Loans Exceed 5% of Holdings

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"More than 150 publicly traded U.S. lenders own nonperforming loans that equal 5 percent or more of their holdings, a level that former regulators say can wipe out a bank’s equity and threaten its survival," according to Bloomberg. Now, 5% doesn't sound like much, true. After all, that would mean as much as 95% of their holdings are ok, right? Wrong. It's about leverage. As Minyanville's Todd Harrison points out, with $500 to $700 trillion in the derivatives machine, a mis-mark by a mere 1% would create a $5 to $6 trillion loss.
SOURCE:   Bloomberg