US Bank Rollercoaster

The Federal Deposit Insurance Corp reported a 1% increase in borrowing for the second quarter 2011 over the first quarter, the first time in three years that lending expanded. However, banks are still experiencing trouble finding credit-worthy customers, especially under the new lending rules, and their bottom lines are showing rising profits only because of accounting sleight of hand -- they are putting aside less to cover lending losses.

On the positive side, the FDIC closed only 22 banks in the second quarter 2011, the lowest number in any quarter since the beginning of 2009, and about 70 total failures for the year. In addition, the FDIC noted the number of 'problem banks' dropped for the first time in five years to 865 -- although that's still about half of the country's 1700 banks.

A tumbling stock market saw a shift into cash positions, allowing large banks to park an extra $137.3 billion with the Federal Reserve in the second quarter, a 22% increase from the first quarter. The FDIC fund used to pay off depositors if a bank fails also increased to have a positive balance for the first time in two years to $3.9 billion, up from its nadir of negative $20.9 billion at the end of 2009.

The overall effect represents a repetition of turtle-like growth -- just enough to slog forward, but not enough to lift the overall feeling of malaise. Retailers can live with the despair of recessionary sales figures. It's the hope of real growth that drives them mad.