LBM dealers grumble a lot that banks are blocking the housing market's recovery by refusing to lend. That's true, but given recent history, banks have reason to be cautious. The Federal Deposit Insurance Corp.'s report on the health of FDIC-insured banks nationwide found that construction and development (C&D) loans–the main type of lending to homebuilders–have the worst repayment record of any major type of loan that banks have on their books. Banks this year already have charged off 5.14% of their C&D loans; that's five times the chargeoff rate for most construction supply companies. And because real estate loans account for nearly three out of every five loan dollars a bank extends, it's no surprise that 829 FDIC-insured companies, accounting for 10.4% of all banks, are on the FDIC's watch list. More than 120 of them–virtually all of them small banks, the kind that many dealers use–have missed their scheduled payments on their assistance from the government under the Troubled Asset Relief Program.