TightWind is written by Kyle Baxter. Stay Hungry. Stay Foolish.

After a Bloomberg story on the Federal Reserve’s involvement in stemming the 2008 financial crisis, the web and media were suddenly flooded with erroneous, angry talk about the Fed loaning $7.7 trillion to banks.

Problem is, that’s false. Suzy Khimm writes:

Problem is, the Fed never actually doled out $7.7 trillion to banks: Much of that $7.7 trillion figure doesn’t reflect loans made, but loan guarantees — the amount the Fed would be responsible for in case of default — and loan limits. Certainly, the Fed positioned itself to take on considerable risk if need be, but the central bank was not handing out $7.7 trillion in cold, hard cash to banks. Politicians and the news media alike have erroneously conflated the two, using “loan guarantees” and “loans” interchangeably. The Fed would have given out $7.7 trillion to banks only in the unlikely scenario that the banks asked for the maximum possible loans and that every one of them subsequently defaulted.