Today’s article on TheStreet.com regarding the strongest banks in the United States hoarding cash is an interesting one. It seems that many banks, especially community-based banks, are being ultra-conservative now because of the financial crisis from the recession in 2008 and 2009. It is certainly understandable since they want to play it safe, but it has to make you wonder what that means for the overall economy.

Some of the top banks in communities across the country now have a tier one leverage ratio above 20, which is four times the amount that makes them an A+ for safety according to TheStreet.com’s formula. The risk based capital ratio at many of these same banks is up above 40, also four times the necessary level to make them an A+ according to the formula.

What does all of this mean anyways? It means that banks are being extra careful with their money and not wanting to take chances on loans and the possibility of charge-offs. For banks that aren’t involved in lending in their communities this is great, but those who are heavy lenders are probably going too much to the other side. The truth is I believe banks need to find a happy medium of not being too aggressive with their balance sheet, but also not just simply buttoning it up and making it difficult for small business owners to get on their feet.

Over time it is imperative that lending get back to a normal level and the people who need loans be able to access them. At the same time the system needs to be limited so that a bank doesn’t over extend their assets and take the chance of failure. For right now hoarding cash has probably been a good idea, but we will need lending to commence again to have a full-fledged economic recovery.