Earlier this month, the European Central Bank launched a liquidity program designed to nudge the region’s banks into providing credit to households and firms. The ECB’s idea was to provide cheap funding to the banks, but at the same time to prevent them from steering this money straight into government bonds. Which is what banks did with previous infusions of cheap central bank funding, thus earning a nice spread on interest rates but doing nothing to boost their underlying economies. Except, it looks as though banks might be able to skirt the ECB’s funding restrictions and do exactly what they’d been doing before: ... (full story)