Lending dropped 1% at JPMorgan Chase (JPM), the nation’s largest bank, in July, August and September, from the three months before. At Citigroup (C) and Wells Fargo (WFC), lending was up, but not much, and not across the board.

Citi’s consumer lending was down, but its business lending was up. Wells was the opposite. Bank of America (BAC) releases its results later in the week.

The question is why. It’s not because the banks don’t have cheap money to lend. At Citi, for instance, deposits, which the bank pays often no interest on these days, grew by $30 billion in the past three months. Yet, lending only rose by $4 billion. Before the credit crisis, banks used to lend about 90% of their deposits.

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The Federal Reserve has been pushing down interest rates in the hope that if it were cheaper to borrow more people would, and then hopefully spend. That’s how it usually works. But in making that so, Bernanke has hit some road blocks.

Perhaps, the most frustrating thing is that while mortgage rates have dropped, they haven’t fallen as much as expected. The dip in overall interest rates suggests that mortgages should now be near 2.5%, instead of the current 3.4%. Mortgage rates actually rose slightly last week.

Some observers believe that a lack of competition in the mortgage market — Wells Fargo, for one, now originates a third of all mortgage refis — has allowed banks to keep mortgage rates high, and discourage borrowing. Nonetheless, mortgage lending does appear to be the one bright spot at all the banks, but most of these loans are refis, and it’s still not enough to create overall strong loan growth.

Two things could be going on. With rates so low, some have said banks might not want to lend. Another theory is that borrowers are still not interested, seeing ahead of them the fiscal cliff, and a general weak economy.

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Citi was going with the later.  “Lending is based on demand,” said Citi CFO John Gerspach in response to questions about the bank’s third quarter results, which were otherwise pretty good. Gerspach said loan rates may come down slightly, but not much, and he didn’t seem suggest it would matter. The Citi CFO said to him the housing market and the economy still seemed weak.

That theory is about to be tested. JPMorgan Chase CEO Jamie Dimon told analysts on Friday that the bank plans to “cut prices,” meaning offer lower interest rates, in order to boost loan growth. Dimon got some push back from analysts over making more low interest loans. But Dimon says if banks want to grow they don’t have a choice. That’s what Bernanke is betting on.