U.S. banks have quietly borrowed nearly $50 billion from the Federal Reserve through the Fed’s new Term Auction Facility. The TAF was designed to ease the credit crunch by lending to banks at favorable rates. However, it “allows the banks to borrow money against all sort of dodgy collateral,” said CLSA analyst Christopher Wood. “The banks are increasingly giving the Fed the garbage collateral nobody else wants to take,” he added, setting up “a perilous condition for America’s banking system.” (Financial Times, free registration)