Why banks are setting aside cash to cover bad loans

By Justin Ho

There’s a special feeling you get during this time of year. The air gets cooler, the leaves change color, and companies issue their latest quarterly reports. Yes, we are in the middle of earnings season. And lately, we’ve been hearing from a number of companies that are preparing for a chillier economy. Call it hoarding their acorns….Karen Petrou at Federal Financial Analytics said banks are essentially pulling out their sweaters ahead of the winter. “We might not need them, maybe the winter will be warmer than we think, but we have the sweaters, we bought the sweaters, we’re ready,” she said. And if there’s a mild recession, or no recession, Petrou said it’s no big deal to put those sweaters back.