Comptroller of the Currency John Dugan offered a gloomy view of the industry's health and said Wednesday that regulators will not hesitate to crack down on troubled lenders.

In remarks to the American Bankers Association, Dugan acknowledged these are tough times for U.S. banks, with 702 banks — nearly 9% of the industry — defined as troubled. He told bankers that regulators "simply cannot turn a blind eye" to problems and have learned the lesson that looking the other way will only compound losses.

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