The Federal Reserve is essentially offering cash for trash, in its expanding campaign to inject liquidity into stalled credit markets.

The Fed last week joined with other central banks in an effort to boost market liquidity by making U.S. dollars available to a wide variety of sources for increasingly suspect collateral. So, if a foreign bank is struggling to obtain short-term financing from its peers -- remember those pesky high Libor rates? -- they can go to their local Bank of England, Swiss National Bank or even the European Central Bank to get dollars. These central banks can knock on the Fed window and borrow dollars on the cheap and put up whatever they think is "appropriate" as collateral. If you read between the lines, that could mean just about anything.

These foreign banks do not, in all cases, have U.S. branches and therefore not subject to our regulations, but they are getting the same sweetheart deal as your neighborhood bank.

The move is the latest in a string of measures aimed at strengthening the banking system. The most recent move being the Emergency Economic Stabilization Act, which created the troubled assets relief program, the much-ballyhooed $700 billion government rescue plan that intends to buy up troubled -- read: unwanted -- assets from the banks. The man in charge of the program is 35-year-old Treasury Undersecretary Neel Kashkari, who parlayed a Wharton MBA into a Goldman Sachs ( GS) job and now yields the power to stabilize the economy.

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