According to this: http://tinyurl.com/7uonza the Fed is giving banks ways to make money by not lending to the public:

"the Fed in an unprecedented gesture has started incentivizing excess bank reserve deposits by issuing interest on these holdings. Rather than being lent out, liquidity provided to banks by the Fed is thus trapped as it earns interest deposited at the Fed. The Fed is essentially issuing debt, and banks are engaging in what amounts to be a dollar-based Fed vs. interbank carry trade. Banks borrow money from the Fed, deposit them back into the Fed (use borrowed dollars to purchase Fed debt), and profit from the differential between the fed funds and overnight rates (profit off of the difference between the interest rates offered by Federal Reserve and other banks)."

I've read elsewhere ( http://seekingalpha.com/article/109210-t... ) that the reason this kind of thing is being done is to keep all the "newly printed" money from being hyperinflationary while the fed keeps the dollar strong and treasury bond interest rates low while it borrows massive amounts of money to cover equally massive deficits.

The Imperfect Storm For Bank Acquisitions – Treasury’s Tarp, Troubled Assets And Tax Benefits --

Through a variety of actions by the federal government, commercial banks that have best been able to survive the current mortgage and real estate crisis and are interested in expanding through acquisition are in a position to use government programs to acquire troubled institutions.

As one of the first pieces of the Troubled Asset Relief Program ("TARP"), the Department of Treasury has quickly rolled out the Capital Purchase Program ("Program"), which permits Treasury to purchase senior preferred stock and warrants in many banks. In addition to the "Big Nine" banks that signed on at the inception of the Program, local and regional banks have until November 14, 2008, to submit applications for additional capital under the Program, and Treasury has stated that they intend to fund the purchases by December 31, 2008. It is also becoming increasingly clear that the Capital Purchase Program is targeted at the healthier institutions and is not intended as a bailout for weaker institutions that are burdened with substantial troubled assets. Since the Program does not require the banks to lend the additional capital to borrowers, many banks are looking at the additional capital as an opportunity to acquire other institutions and consolidate the industry. ...

It what appears to be part of a coordinated effort to encourage acquisitions of weaker banks, in addition to the TARP Capital Purchase Program, the Internal Revenue Service issued Notice 2008-83 on September 30, 2008 ("Notice"). By addressing the limitations on Section 382, the Notice provides a substantial tax benefit to an institution that acquires control of a target bank that has substantial net unrealized built-in losses. Specifically, the Notice provides that recognized losses on loans or bad debts (including any deduction for a reasonable addition to reserve for bad debts) during the five-year post-acquisition period will not be treated as a built-in loss or a deduction attributable to a period prior to the date of ownership change. Consequently, the acquirer is now permitted to offset the entire loss against its income once the loss is recognized, thereby creating what could be a substantial tax benefit that was not available prior to the issuance of the Notice. ...

Not only is the government providing the capital necessary for acquisition via the TARP Capital Purchase Program, but through the Notice it is also providing a substantial tax benefit to subsidize the purchase and subsequent disposition of the troubled assets. ...

It was an in your face armed robbery. Those few hands are now bottom-fishing.
When they think we've hit bottom, they'll buy the world.

Lending would revive the economy and thus defeat the purpose of the enterprise.