But please do not call this a government bailout. Just because banks are "borrowing" tens of billions from US taxpayers below inflation rates under new conditions (which are troubling) doesn't mean it's a handout. Hundreds of billions down the drain, but all is forgiven. Take one guess who is getting stuck with the bill? Surprise! It's you!
“The TAF ... allows the banks to borrow money against all sort of dodgy collateral,” says Christopher Wood, analyst at CLSA. “The banks are increasingly giving the Fed the garbage collateral nobody else wants to take ... [this] suggests a perilous condition for America’s banking system.”
The Fed announced the TAF tool on December 12 as part of a co-ordinated package of measures unveiled by leading western central banks to calm money markets.
The measure marks a distinct break from past US policy. Before its introduction, banks either had to raise money in the open market or use the so-called “discount window” for emergencies. However, last year many banks refused to use the discount window, even though they found it hard to raise funds in the market, because it was associated with the stigma of bank failure.
