During the recent financial crisis, the Federal Reserve and other policymakers throughout the government took unprecedented actions to preserve the financial system and the flow of credit to consumers and businesses. Now, even though the crisis is subsiding, the level of credit outstanding continues to decline.
So it seems important to ask why, in the face of all that was done to preserve it, is credit still dropping? I have heard some say it is because banks don’t want to lend. But I have trouble with that explanation. Banks have to lend to be profitable.