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Watchdog says bad assets still threaten banks

WASHINGTON (AP) - A congressional watchdog reports banks are still threatened by bad loans despite signs that the financial system has stabilized.

The Congressional Oversight Panel warns that banks still hold billions of dollars of risky loans of uncertain value and more could fail if the economy worsens.

The panel warns that if unemployment rises sharply or the commercial real estate market collapses, as many economists fear, the banking system could again lose its footing.

The panel's latest assessment of the $700 billion financial system bailout is being released Tuesday.

The report also says many of the Obama administration's financial stability efforts are working, including infusions of new capital for banks and "stress-testing" of large financial firms.


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