Following Matt, I have read enough stories to think that banks not lending is a problem, though I'm not sure it's actually a problem for TARP and other bailout money recipients, in that it isn't really their role to do small business lending, but instead the role of institutions which haven't been the recipients of as many government goodies, but still the thing with recessions is that there's decreased demand. Increasing demand through increasing investment demand might play some role, but it isn't all that needs to be done.
And the failure of banks to lend might just be perfectly rational in that lending lending to small businesses in the middle of a recession is a risky proposition.
Ultimately, throughout this whole crisis there's been a tendency to want to view all of this as a "liquidity crisis." That's always been some of the story, but with 10% unemployment it is only...some of it.
It's a matter of emphasis. "Banks not lending" may be an issue, but I really don't see it as the issue.
