U.S. banks have borrowed almost $50 billion in the last month from the Federal Reserve, using an expanded government program that some critics fear will deepen instability long-term.

The Financial Times of London reports that the Reserve’s Term Auction Facility has enabled the government to reduce “financial stress” by “channelling liquidity into the banking system.”

It achieves this by allowing banks to “borrow at relatively attractive rates against a wider range of their assets than previously permitted.”

One analyst, however, told the Times that the move allowed banks to borrow more freely against “dodgy” or “garbage” collateral, and said the situation was “perilous.”

Overall, however, the U.S. government program is popular with banks, and may even be expanded.

Source:

“U.S. banks borrow $50bn via new Fed facility”
Financial Times, February 18, 2008