Maybe U.S. consumers aren’t quite so virtuous after all.

According to the flow of funds report from the Federal Reserve released last week, U.S. consumers had cut back on their use of credit in the third quarter of 2009. Outstanding credit card bills had dropped by 8.5% from the third quarter of 2008 to just $888 billion. That was the lowest total since the first quarter of 2007. Home mortgage balances fell to $10.8 trillion at the end of the quarter, down 2.2% from the third quarter of 2008 and the lowest total since the second quarter of 2008. (For more on what the flow of funds report had to say about the U.S. economy see my post https://jubakpicks.com/2009/12/10/household-wealth-and-foreclosure-rate-both-rise-what-kind-of-recovery-is-this/ )

But, Floyd Norris of the New York Times pointed out in his Saturday column, those numbers don’t mean that U.S. households have rediscovered the virtues of thrift. It looks like a good part of the drop in debt is a result of banks writing off bad debts and getting stingier with credit.

So U.S. consumers may not be saving more because they want to. It looks like they’re spending less because banks aren’t lending.

Here’s how this consumer credit crunch works.

For example, banks are writing off credit card debt at a record rate with write-offs climbing to an annual rate of 10.2% in the third quarter.

In response to this high level of bad debt banks have been reducing credit lines, raising monthly minimums, increasing rates, and getting generally tougher on credit card holders.

That’s led to a huge drop in the amount of credit available to consumers on their cards. At the end of September, Norris reported in his column, banks said credit card holders had $3.4 trillion in unused credit lines available for them. That’s down 28% from the peak of $4.7 trillion in unused credit lines in June 2008.

Home equity lines show the same trend. Outstanding home equity loans, which let a home owner tap into the equity in a house, were down just 1% from their peak of $667 billion. But unused home equity lines of credit came to just $539 billion, the lowest since the end of 2005 and down 25% from the peak at the end of 2007.

Businesses in the United States, especially small businesses, complain that they continue to face a credit crunch because banks have cut back on lending.

Consumers, it seems, are facing their own version of a credit crunch.

Both versions are a drag on any economic recovery in the United States.