Loans Expert

Citigroup Inc., Marshall & Ilsley Corp. and Huntington Bancshares Inc. ended 2009 with the biggest drops in the Standard & Poor’s 500 Index, weighed down by defaulting property loans that may add to their declines this year.

Marshall & Ilsley tumbled 60 percent, the index’s biggest drop, according to data compiled by Bloomberg. Huntington Bancsharesfell 52 percent, Citigroup dropped 51 percent and Zions Bancorporationdeclined 48 percent. Banks accounted for seven of the 10 worst performers in the index.

Credit availability is the lifeblood of our economy, and it is essential to our national economic recovery. It enables businesses to grow, jobs to be developed and new technologies to be created.

It is crucial for us, as a nation, to recapitalize our financial institutions, restore their lending capacity and improve credit availability. But in the rush to adopt a $700 billion bailout plan, it’s unclear that these goals will be met.

The Treasury has proposed a bold $700 billion plan to jump-start our national economy, and now Congress is working on a compromise along the same lines.

U.S. Bancorp said its bad loans might increase by nearly 30 percent this quarter.

At a conference in New York on Tuesday, Minneapolis-based U.S. Bancorp (NYSE: USB) CEO Richard Davis told investors that the cost of bad loans could increase 25 percent to 28 percent from the previous quarter.

He also said that nonperforming assets (loans that aren’t meeting interest payments) may have increased as much as 32 percent.

Much of the default amount is tied to commercial real estate from California developers accounts for the bulk of the defaults, however, he added that the company’s conservative approach to lending should soften the blow. He also said that the company is still building reserves and should not need more capital.