Well according to the Fed statistics (http://www.federalreserve.gov/releases/h8/data.htm http://www.federalreserve.gov/releases/h8/data.htm), banks actually are

Well according to the Fed statistics (http://www.federalreserve.gov/releases/h8/data.htm http://www.federalreserve.gov/releases/h8/data.htm), banks actually are still lending just as much as ever (more so to consumers and businesses). The only dip in lending was interbank lending between November and January (by about 10%, but has since returned to previous levels). If you look at liabilities however, banks are hoarding cash. Currently they have about three times as much cash on hand as in September. Presumably this cash is coming from somewhere, and their hoarding of it is hurting something, but it's not hurting lending. My guess would be the cash is from the Fed, the Treasury, and share offerings, but IANAE. So it's not as simple as 'getting banks to lend again' ... because they already are. The problem is more who they are lending to (being on the hook to GM for a revolving credit facility would make me hoard cash too, since the probability of getting repaid is not so great right now), and the fact that securitization has broken down to the point where most banks have to keep the loans on their books, which puts them at risk, especially when some many loans are randomly going bad. Everyone is scared of investing in banks for fear these bad loans might wipe the bank out or cause it to be nationalized. And really, to bring this back to Roosevelt, a lot of what we have to fear is due to fear itself. When everyone is running for cover, trying to build up rainy day cash and laying off people just in case things get worse... well, things will get worse. I'm not saying the whole thing is caused by attitudes, but being scared to buy anything but treasuries certainly isn't helping stocks, and the DJIA is a hugely visible 'indicator' that colors many people's economic outlook in general.