The Financial Wisdom of Children

Everyone's talking about the 'Credit Crunch' - even I, with my limited grasp on these financial problems, ventured to talk to The Boy about it.

"Basically, people can't borrow so much money anymore."
"Why?"
"Because the banks haven't got it to lend."
"Why?"
"Because they lent it to lots of people who couldn't afford to pay it back. I think."
"Will they ever be able to lend money to people again?"
"Yes, I think the government is going to give the banks some money to help them."
"So, why didn't the banks just give the money away to the people in the first place, then get it back off the government? Or why didn't the government just give it to the people?"

Ah, the logic of a child! Now, if someone could come and explain the whole thing to me I'd be most grateful!