More Government institutional wisdom. Lets fix the problem created by making risky loans by…making more risky loans!
Here’s an even better idea… let’s fix the problem originally caused by overprinting money, by printing even more money:
(No, that’s not a data anomaly.)
A graph that reflects much of that same data was recently the subject of much discussion at the “Calculated Risk” blog, with the comments reflecting multiple interpretations. It does not show money supply though; if it did, we’d have to conclude that money has not been created for the entire history of that graph (i.e. since 1910), except for a tiny blip in the 1980s. What the graph reflects is the amount of borrowing from what used to be called the discount window (though it has three different names now). In addition to this, the Fed can buy securities or loan against securities (via short-term repos), thus pumping money into the economy.
Money lent via discount-window type operations have far less impact on final money supply, because they do not expand bank reserves. Though the graph does not reflect money supply, what it does reflect is not good anyway: i.e., that aggregate U.S. bank reserves are negative for the first time in decades. (Actually, this is shown in the graph to which I linked. The one in this thread is only part of the data.)