Douglas W. Diamond and Raghuram G. Rajan
FT.com; April 20th, 2009
Why are banks so reluctant to lend? One possibility is that they worry about borrower credit risk, though worries need to be extreme to justify the substantial drop in term lending. A second is that they may worry about having enough liquidity of their own, if their creditors demand funds. Yet, the many Federal Reserve facilities that have been opened should assuage these concerns.
