Banks continue to hold back making loans to avoid risks in an uncertain economy. The government has made bank executives gun shy, particularly with the 2010 Dodd-Frank Act. A hesitant bank executive does not tend to make risky loans.
The Fed helps this timidity along by making the spread of government investments (cost of borrowing from the government and return from investing in government bonds) a sure thing. So why should bankers make risky loans?
Yet loans to consumers and business are the recipe, the stimulus, the means of getting us out of the deep recession.
Consumers have to want to spend and borrow, and business should want to expand and thus borrow. They have not been doing this as much as they would in a flourishing economy. Fear of government-imposed uncertainties and taxation are the problems. ( See the Earl J Weinreb NewsHole® comment
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