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Ohio Banks Announce Losses

Ohio banks delivered their bad news this morning, a day after Asian and European stock markets plunged. Cleveland-based Key Corp.'s fourth quarter profits fell 83 percent, Cleveland-based National City Corp reported that it lost $333 million in the fourth quarter, compared with a year-ago profit of nearly 850 million. And Cincinnati's Fifth Third Bancorp says fourth-quarter earnings were down 42 percent from a year ago... to $38 million, compared with $66 million for the same period in 2006.

The losses are blamed on problems in the U.S. Housing market and the practice of larger banks buying cheap home loans in bundles from so-called sub prime lenders. When buyers defaulted on the loans, the big banks lost money.

Baldwin Wallace Economics professor Veronica Kalich said she thinks the reports, while troubling on the surface, have an up side.

Kalich: "Many of them took a loss in the fourth quarter . There may be more, but if that type of lending has stopped then things will turn around."

This morning the Federal Reserve Bank cut its interest rate on federal funds by three-quarters percent. Kalich says that only helps matters if people are confident enough and able to borrow.

Kalich: "It's like pushing on a string. The fed determines the price of money, but if you don't have a job or you don't have enough income, it doesn't matter what the rate is."

Kalich says recessions usually last no longer than six months to a year, and we haven't hit one now. For that to happen the country's gross national product would have to be in decline for two quarters in a row. Preliminary numbers for last quarter show weak growth. Official numbers are due out in June.

Kymberli Hagelberg, 90.3.