Both investors and borrowers are concerned about liquidity. Investors desire liquidity because they are uncertain about … when they will want to eliminate their holding of a financial asset. Borrowers are concerned about liquidity because they … compensation for the illiquidity investors will be subject to. We argue that banks can resolve these liquidity problems that arise …

compares the Federal Reserve's actions with the literature on optimal policy in a liquidity trap. The theory suggests that, to … securities markets can restore liquidity with fewer government funds than extending credit to the originators of loans …