Well you can "borrow from the Fed" but you are right that it is different from the federal funds rate. You can borrow from the Fed at the discount window which traditionally is about a point higher than the federal funds rate (and as such only used in emergencies when banks won't even loan to each other overnight). Traditionally it was also an overnight loan that was audited by the fed and which U.S Treasuries were put up as collateral. Traditionally, there was also a large stigma attached to borrowing from the Fed as it was sort of a "last resort" option.
That's changed a bit now as the Fed has does whatever it can to increase liquidity. Less of a stigma, the discount window rate is about what the fed funds rate is, the time period of the loans is longer, etc.
So, you can borrow from the discount window (the fed) and you can do so at a rather low rate. However, the whole theory that the recent upsurge in banking profits is from buying treasuries is a bit silly.
For starters it isn't risk free to buy a 30 year treasury note when you are financing it with short term loans the rate of which could be changed at any time. If interest rates go up your 30 year treasury you bought isn't going to be worth much and may actually start to lose you money. Remember if you are 10x leveraged the market price of that 30 year treasury only has to drop a little for you to lose money. So instead, let's invest in short term treasury rates ( http://www.bloomberg.com/markets/rates/index.html) well except the return on short term treasury rates is about what you would pay at the discount window.
I guess you could invest in short term bonds or other investments, but it isn't going to be risk free then. And it really isn't a scandal that trying to set low interest rates will encourage lending/investing some of which could turn out to be speculative or would not have been made if interest rates were higher. It could also lead to inflation. Those are sort of the costs/benefits of cheap money.
That's changed a bit now as the Fed has does whatever it can to increase liquidity. Less of a stigma, the discount window rate is about what the fed funds rate is, the time period of the loans is longer, etc.
So, you can borrow from the discount window (the fed) and you can do so at a rather low rate. However, the whole theory that the recent upsurge in banking profits is from buying treasuries is a bit silly.
For starters it isn't risk free to buy a 30 year treasury note when you are financing it with short term loans the rate of which could be changed at any time. If interest rates go up your 30 year treasury you bought isn't going to be worth much and may actually start to lose you money. Remember if you are 10x leveraged the market price of that 30 year treasury only has to drop a little for you to lose money. So instead, let's invest in short term treasury rates ( http://www.bloomberg.com/markets/rates/index.html) well except the return on short term treasury rates is about what you would pay at the discount window.
I guess you could invest in short term bonds or other investments, but it isn't going to be risk free then. And it really isn't a scandal that trying to set low interest rates will encourage lending/investing some of which could turn out to be speculative or would not have been made if interest rates were higher. It could also lead to inflation. Those are sort of the costs/benefits of cheap money.