Are Banks Ready for Deadbeats?  The way banks deal with the
possibility of bad loans is to set aside a pool of money, called
the "loan loss reserve." As recession looms, how much banks
increase reserves depends on how bad they think the downturn
will be and how many debtors may have trouble repaying their
loans.  In the last recession, banks were pounded because they
underestimated the risks they were taking. Now a new study of 38
large banks from UBS Warburg's equity research team suggests
that once again, many banks have been too optimistic and set
aside too few reserves to deal with the likely prospect of
soaring defaults and slow payments. That could mean a big hit to
earnings starting with the fourth quarter.  The problem is that
banks have an incentive to under-reserve, because additions to
the reserve pool come out of net income. So far, in 2001, most
banks have kept reserves at 2000 levels, say analysts at UBS
Warburg, despite the worsening economy and rising rates of
charge-offs, which represent the