Will Even This Work?

Felix Salmon:

America's banks -- and the world's, for that matter -- have had de facto unlimited access to very cheap Fed liquidity for many months now. That hasn't induced them to lend. Will this latest recapitalization do the trick? I'm far from convinced.

And what's more, the demand for loans is drying up fast: do you really feel like buying a bigger house right now, or taking out a car loan? Well, businesses are in the same boat. In a recession, their [Return On Investment] falls, so they borrow less.

With less demand for money, and no real desire on the part of the banks to lend it out, I think it'll take more than hand-waving statements from the Treasury secretary to get the credit markets moving again. I do hope that Paulson is looking one step ahead here, and coming up with ways to compel the banks to lend -- even if they don't particularly want to.