Will the banks increase lending?

It is tempting to feel sorry for the banks. The government wants them to lend more to small businesses. The banks reply that too few businesses who want a loan meet their requirements to ensure that they can and will meet the repayments.

But why are businesses so unable to persuade banks that they can and will repay? There too many, and disputed, answers to this question. But one could point to reduced demand for consumption; which in turn relates to the earlier credit crunch caused by the same banks.

Finally the banks may be being too cautious in ther lending policies. These policies are normally confidential business secrets.So we cannot know if this is true. Perhaps there is a fear that once one bank. Lehmans Brothers, was allowed to fail, other banks may suffer the same fate. Thus banks become risk averse; just when the opposite is required!
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