Americans are starting to get their household finances in order.
In an encouraging round of earnings reports, major banks say fewer mortgages are going bad, credit card defaults are down and more people are paying the bills on time.
One of the nation's largest consumer lenders, Wells Fargo, said Wednesday that 29 percent fewer loans went bad in the last three months of 2010 than the year before. And late payments on loans considered likely to default declined for the first time since 2008.
Late payments on credit cards issued by Bank of America, JPMorgan Chase and Citigroup also improved at a record pace at the end of last year, according to an analysis by Barclays Capital.
The reports are a sign that Americans are feeling more comfortable about their finances. Personal spending powers about 70 percent of the U.S. economy, and most economists say a fiscally fit consumer is critical to a strong economic recovery.
"There are signs of stability and growth," said JPMorgan CEO Jamie Dimon.
Economists and policymakers are waiting for signs that the economic recovery can power itself rather than rely on outside supports, like the Fed's decision to buy hundreds of billions of dollars in government bonds to drive down interest rates.
The recent bank results are fueling that optimism.
Citigroup said loan losses fell 11 percent from the previous quarter as more of its customers kept up with payments.
It was the sixth straight quarter of declining losses, allowing the bank to release $2.3 billion from the reserves it sets aside for bad loans and helping it to report a profit. JPMorgan and Wells have also reported bigger profits because they could release loan reserves.
Fewer customers were late on their monthly mortgage payments. The portion of Citi's home loans that were 90 days overdue fell to 2.1 percent from 2.7 percent. And the bank set aside $4.8 billion for future losses, the lowest since the spring of 2007 and a sign it is more hopeful about the recovery.
Despite the encouraging trends, banks are still reluctant to loosen lending. Credit reporting agency Trans-union estimates that 8 million Americans who had credit cards a year ago don't have them now, either by choice or because they were cut off. Banks slashed credit lines and closed millions of credit card accounts in response to regulations passed after the financial crisis.