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These cycles are self-reinforcing: more lending pushes up property prices, which encourages more lending.
In practice, this was social policy: it meant more lending to poor people.
But policy makers played down the risks under the belief that "more lending" was always better.
The easing of liquidity requirements for banks when they have met their capital tests should help spur more lending.
"They're driving more, lending their cars to their boyfriends, and they're getting as aggressive as males, in terms of speed and risk taking," he said.
So the discussions now center on cutting off even more lending to the Iranians and — for the first time — supplies of technology and other goods.
What the government wants from the banks is "more lending, more tax, a bigger contribution to society and less bonuses than they paid last year".
In part because of the credit crisis, lenders are now relying on federal programs or the Education Department to buy the student loans and finance more lending.
It would be better, for example, for lawmakers to bolster federal spending in the near term to create jobs than for the Fed to indirectly attempt to boost activity through more lending.
This combination has prompted several economy-bolstering announcements by Beijing in the past few months, notably a reduction in reserve requirement ratios for banks, a step that effectively opens the door to more lending.
If the government had made more lending a condition of receiving aid, that would not have changed a D performance into an A. But it might have gotten us a C+ or a B-.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com