Generally central banks are thought to be lenders of last resort in liquidity crises. But the U.S. Fed's actions during the liquidity crisis of 2007-08 seems to have been something different. Steve Williamson analyzes the Bloomberg data [h/t Gabriel]:
The three largest borrowers from the Fed during the crisis were Citigroup, the Bank of America, and the Royal Bank of Scotland. It seems widely recognized that the first two were essentially insolvent during the financial crisis, if not now, and the last one essentially failed during the crisis. Lending to these banks certainly does not appear to have been simple liquidity-easing.
This type of lending is NOT lending to help banks through liquidity crises. Rather, this type of lending (at 0.01% when the federal funds rate never dipped below 0.5%) is just a handout, an attempt to shore up otherwise insolvent institutions. I have a gut feeling that the Fed has over-stepped its mandate in these situations.