The article wasn't clear: were these funds paid back with interest? Or is it just revolving debt? What would have happen if one of the counter parties went under? Does the Fed just right off the loss and newly created money that was loaned just vanish?

Here's another article on it from the Christian Science Monitor detailing the loans:

  http://www.csmonitor.com/USA/2010/1201/Federal-Reserve-s-astounding-report-We-loaned-banks-trillions

Of course, if housing prices return to levels reflecting their actual rental value, a lot of this won't be paid back. Its anyone's guess, really, because the situation is so complex and intentionally obscured.

This whole mess is a colossal indictment of the Fed and its easy money policies. No wonder they resisted admitting it.

The real cost of the housing bubble. And probably where the current tech bubble originated.