This is a cornerstone of the Fed, a true shibboleth (Google that one). But one of the first set of bonds the Fed bought under the TALF program were bonds backed by motorcycle loans made by Harley-Davidson (HOG) to its customers.

The Fed program was designed to provide loans and capital to businesses that were shut out of frozen credit markets, which is a good thing. But loans to Harley made to boost the sale of motorcycles to people who could not get loans elsewhere?

The U.S. Treasury and the Federal Reserve extended the TALF program to March 31 for ABS and legacy CMBS deals and June 30 for new CMBS deals. The total for these programs is $200 billion.

Spokespersons for the Treasury and the Fed said: "Conditions in financial markets have improved considerably in recent months. ... Nonetheless, the markets for asset-backed securities (ABS) backed by consumer and business loans and and commercial mortgage-backed securities (CMBS) are still impaired and seem likely to remain so for some time."

Term Asset-Backed Securities Loan Facility (TALF) has been successful for the consumer ABS market, with $62 billion in deals done this year and a dramatic drop in funding costs. The benchmark used is a one-year bond backed by prime credit. The spread over Libor has fallen about 150 basis points to 60 bps over Libor.

No new CMBS deals have been struck in the first half of the year. The main reason for this is that CMBS deals are more complex and require more time to put together.

So as far as the financial markets are concerned, the Fed is saying that we are not out of the woods yet and the market will remain "impaired" into next year.

Did you know that we have a watchdog in charge of overseeing the TARP program? Yes, we have such a person and his name is Neil Barofsky.

Today the U.S. Treasury and the Federal Reserve said that the group of financial programs undertaken have had a significant impact on our financial markets.

That may be true, but Mr. Barofsky reported that the sum total of these programs is exposing federal agencies to a staggering $23.7 trillion.

Here is today's quiz. If you were given $1,000,000 to spend each day, how many days would it take you to spend $12.2 trillion dollars? You are probably wondering where the number $12.2 trillion came from? Well, this is the amount of money the government has committed for economic recovery.

Some of the monies can be accounted for but its still a big mystery where the rest went. So far we know this:

It seems that the Federal Reserve is doing some back peddling these days. The evidence is there to show that interest rates are rising both for U.S. treasuries and mortgage rates. The Fed was going to buy loads of U.S. treasuries -- a move that would have sparked a rally in the bond market. This did not happen.

Now we have yet another program that is put on hold -- the Fed's program to prop up the market for distressed securities backed by mortgages. The Financial Times reports that William Dudley, who oversees the implementation of the $1 trillion term asset backed securities loan facility (TALF) program, said: "We have not made a final decision on whether it is doable and, if is doable, whether it is worth the cost."

The global economy is imperiled because of toxic waste. But what exactly is that? Simply put, it's securities backed by loans backed by assets like houses, shopping malls, office buildings, and credit card debt. Just jam 4,000 mortgages into a trust, pay a credit rating agency to wrap them in a AAA coating, find an investor hungry for higher yield at low risk -- and voila! You've created a vampire that sucks the blood out of the global financial system.

How so? Because what I've just described is securitization -- and the $13 trillion in mortgage-backed securities (MBSs) and collateralized debt obligations (CDSs) that remains on banks' books and in institutional investment portfolios has lost much of its value. $12.8 trillion in taxpayer money has gone to try to prop up the financial system as a result.

That's why it would seem to me that we ought to end securitization. So is that what the U.S. is doing about securitization? Of course not! Instead, it's spending $1 trillion of taxpayer money on Term Asset-Backed Securities Loan Facility (TALF) -- a way to revive a market which is practically dead right now -- having dropped from $906 billion in 2006 to $152 billion in 2008. 2009 deal volume? $16 billion. TALF would lend $1 trillion to investors so they'd start investing again in these securities.

Leon Black, head of Apollo Management, uses the term "black hole" to describe the pressure being put on commercial banks from nonperforming commercial loans. He estimates that it would take $2 trillion to clean up the mess.

So far losses from commercial property loans have not been reflected on bank balance sheets. In the go-go days of the past eight years, money came in from private equity to buy up troubled assets, clean up their balance sheets, and resell them. Now that has all but dried up, leaving only a few firms in the market for distressed assets.

Treasury Secretary Hank Paulson made his bones pleasing his former colleagues on Wall Street by using a chunk of $350 billion taxpayers' TARP to pay $16 billion in bonuses to the bankers who got us into this mess. But let's face it, bankers only make tens of millions in bonuses. The really big bucks -- that is the annual earnings in excess of $1 billion -- go the the hedge fund and private equity runners. And that's where Paulson's replacement is upping the ante.

Rather than pandering to bankers who will now have their salaries capped at $500,000 if they take TARP money, Tim Geithner is going to make $1 trillion of taxpayer money available to those hedge fund honchos at the very pinnacle of the Wall Street food chain. To be fair, not all that $1 trillion will come from Treasury. In the initial phase, the Treasury will provide just $20 billion and the Fed will provide $180 billion -- but the Treasury could increase its commitment to $100 billion to allow the Fed to lend up to $1 trillion.

What is TALF? Term Asset-backed Securities Loan Facility (TALF) is a new $200 billion dollar lending program created by the Federal Reserve.

What does it do? Under the program, the Fed would offer low-cost loans to any U.S. company investing in securitized loans. The asset-backed securities include pools of credit card receivables, automobile loans, and student loans.

Who can participate? Any U.S. company can participate, including hedge funds but excluding offshore funds.

Why did the Fed do this? There are two main reasons behind the Fed's decision. First, even with all the money the Fed has been funneling to the banks by buying government securities, it still is not enough to get things moving. Bank balance sheets are still too constrained. Second, banks have frozen most of their lending except for low-risk customers, and even then the rates on these loans are too high.

What is the benefit of the program? Through this program the Fed hopes to get more loans written at lower rates and bring down the cost of borrowing.

The Fed has now created a new role for itself, that of loan broker, a new and heretofore untried strategy.