Banks Slow to Recover from Meltdown

A year after the collapse of Lehman Brothers, CBS News correspondent Anthony Mason reports the banking system and the credit markets are still feeling the economic aftershocks.

Just last Friday, federal regulators seized banks in Chicago and Minnesota, as well as a Seattle lender. Already this year, 92 banks have failed; in 2007 there were just three failures.

"The markets are still - they're not shut down, but they're still dysfunctional," said Mark Zandi, of Moody's Economy.com.

Georgia's First Cherokee State Bank is healthy, but CEO Carl Hames admits, "It's extremely tough out there. And most community banks in Georgia have struggled in raising additional capital."

Banks are currently on the FDIC's problem list of vulnerable financial institutions. Smaller banks, in particular, are under growing pressure from bad commercials loans they made for offices, malls or hotels.

"Aside from the foreclosure problem in the housing market, the most significant threat to the economy is the growing number of commercial mortgage loan defaults which is going to be very difficult for a lot of small banks to digest," Zandi explained.

For example, 16 percent of construction loans are now in delinquency, more than triple the number in 2007. And 38 percent of all loans for condominium construction are 30 days past due.

Chicago's Corus Bank, one of those seized by the FDIC Friday, was one of the biggest condo construction lenders. Its delinquencies were running more than 70 percent.

Banks also hadn't counted on near 10 percent unemployment, which has consumers cutting their spending and put many retailers in trouble.

According to Bill Gross, of the investment management firm PIMCO, "To the extent that the consumer doesn't come back, then commercial real estate itself won't come back."

That could mean malls or hotels may not be able to meet their mortgage payments, which will mean more losses for the banks.

A year ago, the U.S. financial system went into the emergency room. The patient may be out of intensive care, but it still needs help getting on its feet.

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