How The Fed Bailed Out Insolvent Wall Street Banks

link here to article

This link (via Manan Shukla) cites congressional studies that show that US banks were able to use illiquid assets as collateral for loans from the Fed at close to zero interest rates. They then loaned the borrowed money back to the government by purchasing US Treasuries that paid 3%. Many of the banks leveraged the risk free 3% spread by borrowing up to 10 times the borrowed amount to earn a 30% risk free return. Meanwhile the Fed was proclaiming that the insolvent banks were in good shape by using phony stress tests. This did nothing to restore credit to main street. The Fed kept the banks from going into bankruptcy and the executives earned large bonuses making risk free investments with free capital provided by taxpayers who own the toxic assets and are paying the interest to the banks.