Not only did he not use "tax money;" it seems he hardly used "money" at all. He just advanced numbers on a computer screen, amounting to credit against collateral, replacing the credit that would have been advanced by the money market before the Fatal Day the Money Market Died. According to CNNMoney -"
"[T]he Federal Reserve made $9 trillion in overnight loans to major banks and Wall Street firms during the Wall Street crisis . . . . All the loans were backed by collateral and all were paid back with a very low interest rate to the Fed -- an annual rate of between 0.5% to 3.5%. . . .
"In addition to the loan program for bond dealers, the data covered the Fed's purchases of more than $1 trillion in mortgages, and spending to back consumer and small business loans, as well as commercial paper used to keep large corporations running. . . .
"Most of the special programs set up by the Fed in response to the crisis of 2008 have since expired, although it still holds close to $2 trillion in assets it purchased during that time. The Fed said it did not lose money on any of the transactions that have been closed, and that it does not expect to lose money on the assets it still holds."
Or so it is reported in the media. . . .
The pigeons slip back up the sleeve from whence they came, a sleeve that was empty to start with.
The Central Bank as Lender of Last Resort
Where did the Fed get this remarkable power? Central banks are "lenders of last resort," which means they are authorized to advance as much credit as the system requires. It's all keystrokes on a computer, and the supply of this credit is limitless. According to Wikipedia:
"A lender of last resort is an institution willing to extend credit when no one else will. Originally the term referred to a reserve financial institution, most often the central bank of a country, that secured well-connected banks and other institutions that are too-big-to-fail against bankruptcy."
Why is this backup necessary? Because, says Wikipedia matter-of-factly, "Due to fractional reserve banking, in aggregate, all lenders and borrowers are insolvent." The entry called "fractional reserve banking" explains: