We all heard the reasons for bailing out the too big to fail banks. They needed money to lend or nobody could get a loan, right? Without loans the money supply would contract and we would risk a depression. Then they got their money and still would not loan the money out.
How much have those banks increased their lending since then? Even now I have heard they are still not lending enough money. NPR is my source.
If we had let those banks fail and helped new banks take their place would it have been so different? Either way there would be little lending, right? The Federal Reserve System could have done quantitative easing to stabilize the money supply in the same way, only we would not be rewarding the banks that created the mess and we would have all new banks we could reward for helping get the economy back on track.
It seems to be more of a question of time to me. Does bailing out the too big to fail banks increase lending faster than all new banks? If so, how much faster?