It's common enough at the beginning of a new year to reflect on where we have been and on where we are headed. A tougher question for the banking industry to answer at the start of 2011 may be: where are we now?

There is macro-level economic data to consider, but also emotional barometers. Did consumers spend with gusto this holiday shopping season? If so, did everyone feel good about it?

Two years after a global panic, bankers appear to be in a financial purgatory, unable to pinpoint their coordinates. Is it safe to refer to the financial crisis as an event in the past? Shall we call it "the current financial crisis," or "the financial crisis we may or may not still be in the middle of"? And even if we could settle on the proper vocabulary, would it still be appropriate a year from now?

Teresa Ressel, chief executive of UBS Securities LLC and a former Treasury Department official, remembered how the recession of the early 1990s seemed to cast a pall on the country until one day, when it no longer did. "You just didn't really think it would get better, and then it got a little better in 1992, and a little better in 1994, and all of a sudden it went from tepid to scorching."

If another tipping point were reached, would anyone even realize it while it was happening?

Progress toward the next inflection has so far been unsteady and discriminate. Though some banks are talking about restoring dividend payments, others are acquiring loan books at much lower marks than analysts would have anticipated. While asset growth is the holy grail in some corners of the industry, in other corners simple capital preservation remains the only goal.

Andrew Marquardt, a banking analyst at Evercore Partners, addressed the question of where we are by separating out different mechanisms at work in the banking system.

"We're clearly past the liquidity crisis, and in the credit cycle, by our calculations, we're 60% to 65% through lifetime losses," he said.

"On [net interest] margins, I think there's still going to be some downward pressure," Marquardt said, "but I think we're close to bottoming. And I think what the next factor will be for the banks is capital deployment."

Against the vivid memory of panicked markets, it almost seems unthinkable that bank executives are fixated again on paying dividends and repurchasing shares. But between the passage of time and the watchfulness of regulators, who pushed back against banks that were eager to reinstate dividends in 2010, Marquardt said there is reason to have confidence in what he considers to be the next milepost for the industry.

"We started this [crisis] at the end of 2007; it hasn't really been that quick," Marquardt said. The dividend increases and stock buybacks on tap for 2011 will not involve "massive numbers," he said, "but I think it will be another signal that we're thawing, and it will help shift the sentiment on the sector."

But sentiment is up against two clouds still hanging over banks: regulatory pressure and the economy.

The piecemeal approach to reform — first the credit card legislation, then new overdraft rules, and finally the Dodd-Frank Act, with each component carrying its own timetable for implementation and its own level of attraction as a political pawn — makes it tricky to gauge where the industry is in terms of regulatory change.

"Dodd-Frank is a six-lane highway," said Lawrence McDonald, a former Lehman Brothers Inc. bond trader and the author of "A Colossal Failure of Common Sense," a book about the firm's collapse. "Some of the cars are moving 80 miles per hour, like everything around MasterCard and Visa and consumer protection, but all of that is moving so much faster than [reforms regarding] things like securitization."

McDonald worries that businesses that depended on the securitization market for funding will remain hamstrung until that piece of the financial system gets addressed in full, putting a crimp in employment and economic growth in the meanwhile.

Mark Schweitzer, director of research at the Federal Reserve Bank of Cleveland, said his concerns are concentrated on the housing market, not only because of the potential for home values to go lower — "I don't want to predict a reduction, I don't want to predict an increase," he said — but because of the connection that real estate has to commercial and industrial lending and small-business lending.

Even for banks that don't have much real estate exposure, "there's still an uncertainty about collateral," Schweitzer said. "Until we solidify that, it's kind of an uncomfortable time to be expanding your lending."

And yet banks, facing pressure to grow assets, are eager to make loans again — a tension that may come to define whatever phase this may turn out to be for the industry.

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