Instead of lending, banks focus on covering losses
The article states that many banks are not lending large amounts of money and instead have focused on paying back government aid and recovering from massive losses on defaulted loans, estimated at up to $4 trillion. It could take years for the United States to recover from such large amounts of bad debt and in the mean time, banks have limited the amount they are willing to lend. Analysts expect that small businesses that rely on banks for credit will suffer the most and could hinder the country's economic growth.
"It's pure risk aversion," said Mr. Spitzer, referring to banks' unwillingness to lend. "They don't want to take the risk of making loans." He added that the government has gone to great lengths behind the scenes to convince banks to lend more, but have received little response.