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BY ADNAN KHAN

The number of banks on the FDIC’s troubled banks list is now at its highest since 1993 and has  people worried about whether this is a sign of an ever-weakening economy or even a possible double dip.

The number of faltering banks jumped from 775 in the first quarter of this year to 829 in the second quarter. CNNmoney reported 118 banks have failed and it’s expecting the tally to reach 200 by the end of this year. Fortune magazine’s senior writer says this is a sign of a slowing economy.

“Everybody says the economy is slowing down. Even the people who say it’s not going to be too bad they’re saying the economy is slowing down. So, you got a slower economy you get more unemployment, you get more bank failures, there’s no two ways about that. So we are going to get more bank failures, we’re going to get that problem bank list approaching a thousand in the early to middle of next year I would think we’re probably going to get a problem bank list near a thousand, which we haven’t seen that since the end of the '80s and S&L crisis.”  (CNNMoney)

According to the AOL money site, Daily Finance, even though the number of bank failures has increased, the amount of assets owned by the “problem” institutions has decreased from $431 billion to $403 billion, which is a positive sign. FDIC chair Shelia Bair says that’s a good sign.

“While she acknowledged the industry still faces challenges, Bair said that if economic conditions remained positive, many institutions could maintain profitability and hopefully increase lending.”

The news has been received with a feeling of indifference in the blogosphere. The blog, The Daily Bail, points out the story should not be taken out of context.

“Not all problem banks will fail — and not all failures will be from the problem bank list — but this shows the problem is significant and still growing.”

And CBS Marketwatch says the increase in the size of the list is not all bad news. Smaller banks are getting premiums or simply being acquired by larger more stable organizations.

“Traditional banking, after all, is still a lucrative business. It's hard to lose money when you can borrow from the Federal Reserve for nothing and lend it out — even at today's minuscule interest rates.”

So is an increase of 53 banks on the “troubled list” a sign of a downward spiral, or simply the market taking care of itself?