So, Wall Street paid itself enormous bonuses last year, and of course there's no real chance that they're going to be asked to give any of that back (and they could be, of course, in the form of various confiscatory taxes), despite the fact that the Street finds itself in the position of losing trillions of dollars on bad debts over the next couple of years. The Fed is finally biting the bullet and realizing that American taxpayers are going to have to basically take over a lot of the bad debts.
Officially, the line is that the Fed is "lending" T-bills (the safest sort of security) to banks, and allowing them to use their "riskiest" (e.g. worthless) assets as "collateral." But let's be clear about what this really means -- it means that the United States government is essentially taking over the worst assets. If you abandon the euphemisms, what's happening is simple: the American taxpayer is bailing out the bankers. Main Street is literally being forced to pay for Wall Street's sins.
Now, I don't have any problem with this -- it's a necessary thing (if anything, it's not nearly enough action) in order to keep the global and national economy from going into a world-historical tailspin. What I object to is the fact that the bankers are going to be allowed to keep the huge bonuses they paid themselves while they were busy creating this mess during the upward phase of the cycle in 1999-2006. Here's the bonuses that Wall Street handed out over the last few years:
1999 - 13.4 billion
2000 - 19.5 billion
2001 - 12.8 billion
2002 - 10.1 billion
2003 - 16.2 billion
2004 - 18.6 billion
2005 - 21.5 billion
2006 - 33.9 billion
2007 - 32.0 billion
Shouldn't these bankers be forced to pay some of this back? Ah no, now that would be "socialism," that would be "class warfare." On the other hand, when the US taxpayer is told (not asked) it is going have to pony up $200B, that's just sound monetary policy. This current crisis has the benefit of being highly clarifying regarding what American capitalism is all about: it's about privatizing the profits during the boom times, and socializing the costs during the bust.
It shocks me that, even in an election year, this is not getting any attention.