“European banks are issuing asset-backed securities in massive amounts and pledging them to the European Central Bank as collateral on its term repo funding. Since September, more than 50% of European ABS issuance has been used as ECB collateral.”

“Thus, we have found out that European banks have continued to issue billions of euros-worth of residential mortgage backed securities (RMBS) that are never sold to any investor. After securing the rating, the securities, which are simply paper representing actual mortgages in the books of various banks, are pledged as collateral to the ECB and liquidity lines are drawn.”

The Fed is only now doing what the ECB has been doing since August: that’s called follow the Leader.

Re: “intimate”, does that imply a long romance?

Visits to The Fed/Treasury clinics:
http://en.wikipedia.org/wiki/Methadone

Methadone has traditionally been provided to people who are opiate dependant in a highly regulated methadone clinic, generally associated with an outpatient department of a hospital, though this varies country by country. For example in Australia, Methadone maitenance treatment (MMT) is delivered by private pharmacies for a nominal fee to the client (regardless of the fact it is free as it is subsidised by the Federal government).
In many Western countries, new patients are required to visit the clinic daily so that they may be observed taking their dose by the dispensing nurse, but may be allowed to leave the clinic with increasing supplies of “take home doses” after several months of adherence to the clinic’s regulations, including consistent negative drug-screen results. The way that MMT is delivered in some countries create barriers to scaling up access to the treatment. For example, in Australia, people who are on MMT are dosed in designated area in front of other pharmacy customers. This can inhibit people’s willingness to access treatment due to a lack of confidentiality and anonymity. In some countries or regions, law stipulates that clinics may provide at most one week’s worth of methadone, (up to 30 days in the USA) except for patients unable to visit the clinic without undue hardship due to a medical disability or infrequent exceptions made for necessary travel to areas without clinics, and this level is only reached after a few years of proper results.

>> IMHO, any bank or builder begging for taxpayer cash should have every detail of fraud accounting brought before a bankruptcy court and they should sit in fron of a public jury and be crucified!

This is correct, the ECB has always repo’d a wide variety of collateral types for wide variety of counterparties.

“Recent CLO deals have been “eating into the massive overhang of leveraged bank loans and alleviating some of the stress in the capital markets,” said Peter Plaut, an analyst at hedge fund Sanno Point Capital Management in New York.They’re also “an easy way for banks to reduce balance sheet risk, which indirectly helps reduce capital requirements, by funding the AAA through the Fed and selling the equity, which provides high yield to investors,” Plaut said.”

High yield because they’re high risk. So lets see: Banks/etc can’t sell they’re sketchy loans, so they transfer said loans to what essentially amounts to a shell company (a CLO), buy the sketchy loans off themselves using money from bonds sold to the Fed, and sell stock in their new shell company to investors for a quick profit.

Exact technicals aside, am I getting the gist?

Sold, or borrowed against on loose terms and indefinite duration? The economic distinction between the two is fuzzy, but if the Fed has bought anything outright other than as part of the Bear deal, that is big news. I’d like to know more… (Perhaps the “sale” was a repo, which is after all, legally change of ownership? Then Lehman could get away with chirping about its deal without technically lying, and the Fed could be the lucky purchaser, without technically buying…)