Rising loan totals can be a bad sign. Such loans soared in the weeks after Lehman Brothers failed in September 2008, but not because banks suddenly were more willing to lend. The opposite was true. What happened was that numerous companies decided to take all the money they could under letters of credit the banks had issued in better times. In some cases, the borrowers needed the money because they could no longer sell commercial paper. In others, they feared that unused lines of credit would be canceled.

After that surge, bank lending plunged. Banks tightened credit standards and, like many investors, became intolerant of any real risk.

In the third quarter of last year  even after the recession had ended  commercial and industrial loan volume fell at an annual rate of about 25 percent.

Now, however, the volume has stabilized, and it is even rising a bit.

That is not true of some other types of loans. Fed data indicates that commercial real estate loan volumes are down, and so are consumer loans. Some politicians point to such figures as evidence that bailed-out banks are not doing their duty to help the economy recover.

But those who like to bash banks might want to hesitate before complaining that banks are not lending enough. After all, this crisis  and the recession that arrived with it  was caused by banks lending too much, at credit standards that were too low.

Image Credit... The New York Times

What would we be saying if, say, JPMorgan’s volume of outstanding option or “pick a pay” ARM’s was rising instead of falling? (You remember those particular ARM’s, don’t you? They are the mortgages that let borrowers pay as little as they wished, with the loan balance rising every month if the minimum amount was paid. Washington Mutual specialized in such loans. There would be far fewer foreclosures if that product had never been invented, and a WaMu branch might still be on a corner near you.)