During the housing crash, which we are slowly recovering from, one thing that frustrated me the most was that banks were not lending. I was working hard to stay afloat and get people approved for a loan, but to no avail. People with good scores were being denied. I didn’t understand to recently why that was. I had drawn my own conclusion that they were just afraid and that no one would pay for their new homes and foreclosures would be worse than it already was at that time.
Now I have learned why banks had stopped lending. It appears that banks issued a lot of credit lines to companies as secured loans. And at the beginning of the crash, businesses feared that the banks would cut their credit line or that the banks would crash, so they withdraw all of the money available to them and this caused the banks not to have any money left to lend. These companies literally drained the financial blood from banks and they ability to make new loans.
The more you learn, they more you know.