[jmherbener]

The demand for credit has fallen but the demand for money has risen. This is the tendency in every bust. People borrowed too much during the boom and so their demand for credit declines. At the same time people anticipate a decline the price of assets they acquired during the boom and so their demand to hold money increases. The effect is both low interest rate (from the reduced demand for credit) and low price inflation (from the increased demand to hold money).

As you say, the Fed’s QE1, QE2, and QE3 have been bailouts to financial institutions. The Fed bought their bad assets (or claims to assets) and paid with cash (technically, checking account balances at the Fed). This made the financial institutions both more solvent and more liquid. If banks use their excess reserves as the basis of issuing fiduciary media, then the money stock will explode and serious price inflation will result. But until banks use their excess reserves to increase the supply of credit by issuing more fiduciary media, the conditions in the credit market have not changed.