We see all sorts of conflicting  reports about whether the decrease in small business lending is caused by meager demand or stingy supply.  But the research usually comes from different institutions.

Now it looks like people within the Federal Reserve are reporting divergent opinions.

With vastly-improving payments infrastructure leading the way, electronic payments have clearly taken hold for both business-to-business and consumer-to-business payments.

A new payments study out by the Federal Reserve--the fourth in a series that is released every three years-finds that big changes are afoot in the payments landscape. For instance, electronic payments now account for three quarters of all payments, by number of payments. In addition, since the last survey came out, not only have debit cards surpassed checks as the most-used non-cash instrument, but also prepaid card use has increased dramatically.

Plus, checks have declined at a faster rate than ever and the use of credit cards as a payment mechanism declined for the first time since the studies began.

US corporates may have an easier time that their European counterparts when it comes to future bank lending as banks begin to gear up for new capital requirements under Basel III.  

However, the actual impact is as yet unclear, in particular as few analysts can agree on the impact of risk-weighted asset reductions on the amount of equity that banks will need to hold to meet tier one capital ratio requirements under the new guidelines.

Bear with me here. This is going to be one of those "out there" posts. But Steve Randy Waldman takes an interesting stab at a problem I've been wrestling with, at least in the furthest reaches of the financial corner of my brain, since the financial crisis began.

And that is how to stimulate the economy without creating another asset bubble. It sounds easy enough to the Keynesians, but as Waldman has pointed out before, rebooting aggregate demand through traditional government action may simply create another bubble. And ultimately, the distinction between monetary and fiscal policy may be moot.

This brouhaha over the Boston Fed's rationalization for missing the housing bubble reminds me of a conversation I overheard a few weeks ago between a former Federal Reserve bank supervisor and his counterpart at the New York Fed.

I can't give you their names since they were conversing privately a few feet away from me before the start of a conference on financial regulation (nor can I give you the name of the confab since that would give their identities away), and I just managed to overhear the exchange.

This piece published today by Project Syndicate is as insightful a critique as I've seen of the consensus that has emerged among policymakers that government deficits must be cut to restore economic growth.

Not that we haven't taken a stab at that ourselves.

Corporate borrowers will likely continue to enjoy record low interest rates in the next few months as the Federal Reserve keeps selling Treasuries and the outstanding level of corporate bonds goes down.

Obviously, that's if the US economy avoids a double-dip recession.

I have to disagree with my colleague Steve Taub on this, not because my heart bleeds for jobless, underwater homeowners, but to keep foreclosures from driving home prices ever downward.

Here's the thing: What is the "natural" price that Steve wants the market to find?

As part of the financial overhaul, federal banking agencies have jumpstarted the process of finding alternatives to using credit ratings for calculating banks' capital levels. But alternatives are few and far between and some could be expensive too.

The various bank agencies - the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision - are seeking to gather information and comments on alternatives and on a set of criteria considered important to evaluate creditworthiness standards such as risk sensitivity, transparency, consistency and simplicity.

If the Federal Reserve Bank of New York requires mortgage originators to repurchase mortgages acquired through the bailouts of companies like American International Group and Bear Stearns, as it said it might, banks could face weaker earnings and reduced lending capacity as a result.

Second-quarter earnings showed that recovery is on its way for banks, with, for example, Morgan Stanley beating analysts' forecasts. But there's still some pressure on the industry.