The data initially looks good but a change in accounting rules is the reason and not more lending by the banks.
In Chart #1 you can see the recent large spike in total loans and leases at commercial banks. New accounting rules forced the banks to place off balance sheet items back on their books. (I thought the Enron scandal fixed all that? Guess not)
This really throws off the year over year data so don't get excited if you hear bank lending has recently surged.
Just to show you how this decline in lending is unusual Chart #2 shows the series longer term on a year over year change. As you can see until recently serious declines in lending never happened.
In case you are wondering what the banks are buying instead of lending... they are buying US government securities.
In my opinion this lack of lending by the banks is just one reason the Fed is freaked out and is prepping the markets for QE 2.0. They are going to flood the market with money to try to get more people to borrow money and buy stuff. Unfortunately I don't think it will work and I'll be writing about that soon(tm)