Even before issuing loans, banks look at market conditions and ratings. In the present scenario, banks will stop giving loans to companies. When Fitch and S&P c

Even before issuing loans, banks look at market conditions and ratings. In the present scenario, banks will stop giving loans to companies. When Fitch and S&P cut down ratings for many companies, banks become reluctant. Yesterday, the federal reserve agreed to take commercial paper with certain ratings. What repos do: swap one kind of IOU (I owe you) with another kind of IOU. This doesn't make banks to issue new loans to distressed companies, any more than you/I can give loans to a dead beat. During good times, everyone is happy to issue loans.