Phony Accounting

The Fed created an obscene sum to bail out the profits of the banks carrying fraudulent toxic paper. These loans provided a mirage of 'balance' against all the failed debt that they would have had to declare as losses. Like a miracle, the banks are technically 'in the black' again, thanks to this funny money transfusion. This sum cannot be released into the economy by the banks because massive inflation would soon follow. So, the banks are sitting with reserves swollen to unprecedented heights, or are they are recycling them back into the Treasury auctions to keep downward pressure on rates.

You can see this pile of reserves in the Fed's own chart:

http://research.stlouisfed.org/fred2/data/RSBKCRNS_Max_630_378.png”