Is this Insane?

How are bail-out operations currently financed in North America and Europe? The State gives good money to the banks and insurance companies on the verge of bankruptcy, either as recapitalisation or through the purchase of their toxic assets. What do the bailed-out institutions do with this money? They mainly buy safe assets to replace the toxic ones in the balance sheets. And what are the safest assets on the current market? Public debt securities issued by the governments of industrialised countries (treasury bonds issued in the US, in Germany, in France, in Belgium, you name it).

This is called looping the loop. The States give out money to private financial institutions (Fortis, Dexia, ING, French, British, US banks,...). To support this move they issue treasury bonds to which these same banks and insurance companies subscribe, while remaining private (since the States did not demand that the capital they injected give them any right to make decisions or even to be included in the voting process) and deriving new profits from lending out the money they have just received from the States to these same States while of course demanding maximum return.

Financing the Bailout:
A Holy Union for a Deuce of a Swindle By Eric Toussaint