Semi-market solution to the credit freeze

We dip a little into an authoritarian world: simply mandate that banks must lend a certain amount, perhaps a percentage of deposits.

It is up to them, i.e., the market, to discover the least risky borrowers to comply with the mandate.

The government must determine how much lending to mandate.

We might need to prevent banks from all lending to each other in a circle, although I've heard that the lack of interbank lending is part of the problem, so maybe this is not such a bad thing.

Technically, buying U.S. Treasuries counts as lending (lending to the very unrisky U.S. government). It might take some thought to assure ourselves that the market will sort itself out about this, via the price of Treasuries, or additional regulation might be necessary.