How can governmental intervention guarantee lending standards be relaxed? It can provide liquidity, and indeed bolster the balance sheets of banks, but there remains informational asymmetry. Banks know more about their prospects and their customers than governments do. They also understand that this is a wonderful environment to let other make the first mistake...and then buy up foolish banks who heeded the governments call to "lend, lend LEND!". Much of this is basic warfare - keep your ammunition sources in good condition.
Capitalism and private enterprise generally does a much better job of allocating capital than centralized government. But it does have its limits. George Soros wrote about credit inflation/deflation bubbles in "The Alchemy of Finance", first published in 1987. Euphoric markets tend to under and overshoot "reality".
With this much intervention, price identification in credit, currencies, equities, interest rates, indeed every financial asset will take time. Operators find it difficult to deploy capital when the fundamentals are blurred, and thus park their funds in "risk free" instruments. Thus, some new price bubbles (like bonds from "safe" jurisdictions) are appearing.
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