In a report from the FDIC that the Deposit Insurance Fund has been operating in the red since the third quarter, down by $8.2 billion, there was other bad news, as the number of banks on the problem list of the FDIC has now risen to 552, which in reality is probably much worse than it seems.

The reason for it being much worse is in connection to the 50 banks that have folded since the middle of 2009. We have to assume those banks were on the past list of 416 problem banks identified by the FDIC. With that having to be the case (at least the majority of them), it means the number of problem banks added to the list are in reality 186 when taking that into consideration.

Other concerns are the combined profit of $2.8 billion for the third quarter of all banks and thrifts. It’s not the relatively low number which is the problem, but that the profits aren’t coming form loans, which has been part of the problem for some time.

FDIC Chairman Sheila Bair stated on those concerns: “There is no question that credit availability is an important issue for the economic recovery. We need to see banks making more loans to their business customers.”

This comment from Bair sounds right, but really isn’t that meaningful in the current economic and credit crisis. Banks have rightly tightened up their credit standards, something that should never have been allowed to lapse in the first place. So there’s no way that they’re going to just loan out money to businesses based on the idea that they’re part of a movement to restore the economy.

Loans have to be worked out on an individual basis, and if the businesses are creditworthy, that will determine whether they receive a loan or not, and nothing else.

The other problem is the existing commercial loans on the books of banks are disasters. The fallout from them hasn’t really kicked in yet, as the second half of 2010 is expected to reveal how bad those really are.

When you sift through all the chatter on the subject, the truth seems to be that there is a much higher focus on avoiding risk with commercial loans rather than a move to extend credit.

So with the number of problem banks rising so much and banks in a defensive loan mode, the idea that a recovery is on the way continues to baffle everyone that thinks it through. Just taking a few of the giant bailed out banks and using them as an example of a recovery doesn’t cut it.

Problem bank numbers will continue to rise, along with failures. Alt-A loans are going to be due for mandated re-sets in the first half of 2010, with commercial loans projected to crash in the latter half.

Add to that the fact that money isn’t being made through loans but through investments the banks are making, and you see how there won’t be any jobs added in that economic environment, and few banks have the will or resources to take make the types of loans which government officials assert will be needed to help the economy recover.

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