The report issued Feb. 25 by the Federal Reserve, the Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency amounts to flashing red lights on the condition of U.S. corporate debt, ready for a blow-out. In short, the rate of “non-pass” loans, which are those regarded as loans unlikely to be repaid, nearly doubled from an already worrisome level of 6.9% in 2019, to 12.4% in 2020. Most of these non-pass loans are held by non-banks, according to financial media.
However, in the group of sectors hit hard by the pandemic—transportation, travel, retail, entertainment, and so on, including oil and gas—the volume of non-pass loans jumped up from a shaky 13.5% in 2019 to 29.2% in 2020.
