The difference is that borrowing from the Fed creates new reserves for the banking system.
Borrowing from other banks in the Fed Funds market does not create new reserves for the banking system.
Well the European Central Bank has just pumped an astonishing amount of new loans into the banking system.
This injects new liquidity into the banking system, thereby feeding the credit boom.
Kim Iskyan of Renaissance Capital, who has written a new study of the banking system, believes that without reform another crisis is inevitable.
The Federal Reserve continues to assert its intention to purchase a trillion dollars of Treasury securities and mortgages, adding a trillion dollars to its portfolio and stuffing a trillion dollars of new liquidity into the banking system, until the unemployment rate falls below 6.5% or inflation breaks out.
The Bank of Japan should rapidly flood the banking system with new credit, ending the decade-long dehydration of liquidity.
The Fed does so by, in effect, quarantining inside the banking system the new toxic money used to launder the dirty loans.
FORBES: Is The Federal Reserve Using Money-Laundering Techniques To Cleanse Banks' Balance Sheets?
Still, the crisis made it painfully clear that the world's banking system needed new international rules to impose lending discipline and guard against any temptation to migrate to the weakest regulatory regime.
They are afoot today, with the reform of Britain's banking system, and new data about the Scottish economy.
Sami attributes working through this problem and new regulations as the reason that the banking system is much stronger now.
Our banks in 2008 and 2009 were forced by our OCC, FDIC, and Treasury Dept. to raise hundreds of billions in new equity capital which recapitalized the entire US banking system.
Officials hope that the new system will give more Mexicans access to banking and credit, and so help the country's development.
With new capital rules looming, and China's banking system grappling with slowing profit growth and the potential for more bad loans, the ICBC sale appeared inevitable, they said.
The Federal Reserve Bank of New York, which supplies liquidity to much of the banking system, has no plans to move away.
Instead, it is drawing up new rules that would allow it to intervene in its banking system and close down troubled banks, which is raising questions since the whole purpose of the bailout of its banks was so they could continue to operate.
FORBES: Troubling Times Ahead As Euro Politicos Finally Finish Vacations
The macroeconomic picture has improved and investor confidence has found a new lease on life after Tokyo halted the deterioration of the banking system, public funds juiced up the statistics and numerous private companies began restructuring their operations.
Bank of England governor Sir Mervyn King, who also chairs the group of regulators from 27 countries that agreed the deal, said that the phased introduction would mean the new standards would not "hinder the ability of the global banking system to finance a recovery".
Japan, by contrast, needed to scrap its antiquated banking system, migrate half of its industrial work force into new-technology exploits and open up its service economy to the withering discipline of foreign competition.
These would include a new house building programme, bringing back the 10p tax rate and reforming the banking system.
When housing crashed, it was the lack of new asset backed securities that pushed the economy into recession by freezing up the banking system and destroying consumer and small business credit markets.
And we need radically new ways of funding scientific businesses, who are consistently let down by our banking and investment system which values quick wins over long-term growth.
New financial regulations will force low- and moderate-income Americans out of the traditional banking system, according to a panel of banking analysts at a gathering of more than 600 Wall Streeters on Thursday just hours before the Senate was expected to approve the financial regulation overhaul bill.
FORBES: New Financial Regs Will Force Low-Income Americans Out Of Traditional Banks
One could analogize the U.S. banking system that is frantically looking for a way to plug revenues holes caused by new regulations that limit their ability to extract historic fees from consumers like overdrafts.
And since the banking system is still dominated by the government, the banks will not refuse to offer new loans, even if old loans sour.
Some may also question whether the payment system is still, in today's world, a major block to new entry in banking.
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