After all, they -- and we -- still have to face a crisis or series of crises in Europe. In response, the Fed has been doing stress tests on major banks.
Jeremy Hobson at Marketplace interviewed Cornelius Hurley, director of the Center on Finance, Law and Policy at Boston University. The outlook is not all that great.
HURELY: Stress testing is something the regulators should be doing on an on-going basis anyway. One would hope that the Fed, in combination with other primary regulators, has a daily read on the pulse of the financial services industry and I would suspect that the Fed is highly confident that the results of these stress tests will be positive.
HOBSON: Do you think think things are getting better or worse in the banking system in this country right now?
HURELY: That's an excellent question. If you look at the FDIC's statistics from yesterday, bank profits for the last quarter at $35 billion have returned to pre-crisis levels. However, most of that comes from banks no longer squirreling away money for a reserve.
The problem is, banks are just not lending at the volume they should be lending to promote a recovery. So from an earnings and capitals standpoint, the banking system seems to be improving, but from a role in the economy and the proper functioning of banks in our economy, I cannot have the same optimistic analysis.
