Unfreezing Credit
Are banks refusing to lend because they think borrowers are too risky, and thus that they won't be able to meet their obligations to their own creditors, or is the problem that they fear being short of funds when investment opportunities - buying up distressed banks' assets - get even better. If it's the latter, more intervention will be needed to prevent fire sales.
CHICAGO – Little political enthusiasm exists for further support to the banking sector. One reason is that banks that received money in the initial rescues do not seem to have increased their lending, without which monetary and fiscal stimulus are unlikely to be effective. For banks to start lending again, even more intervention may be needed.
CHICAGO – Little political enthusiasm exists for further support to the banking sector. One reason is that banks that received money in the initial rescues do not seem to have increased their lending, without which monetary and fiscal stimulus are unlikely to be effective. For banks to start lending again, even more intervention may be needed.