Yes. The banks are the ones that ultimately are creating money through giving out loans. The fed, as far as I understand, can only influence this indirectly. I

Yes. The banks are the ones that ultimately are creating money through giving out loans. The fed, as far as I understand, can only influence this indirectly. Interest rate setting is supposed to throttle the demand for loans. Lower interest rates, higher loan demand. Therefore, more money enters the economy. However, the other side of the equation is the banks' appetite for giving loans. There are times when banks (due to regulation or market risk they perceive) that they'll be more or less likely to make loans regardless of the demand side. The fed seems to be only controlling the demand and not the supply. They cannot force banks to make loans more willingly directly. Another aspect is the appetite for the sorts of loans banks want to give. There's an argument that too many loans are now given for speculation (housing, asset purchase) and not for things that grow the economic pie like small businesses. Small business are more risky for the banks than speculation so we end up in this sort of undead economy.