There's an error, here, though. The government isn't lending any money - it's giving it away. Specifically, it's going to give away perfectly good money purchasing securities that no one else on earth wants at any price. I still wonder why loans are off the table? Why does all this money have to go to lending institutions in a form that will never require any of it to be paid back? If restoring liquidity is the goal, why can't we make the loans that are required to keep the financial world functioning, allow the weakest lenders start to fail, and allow the others to strengthen their position by purchasing the better paper at fire-sale prices?
Could it be that the people running the show think their primary responsibility is to guarantee investments, rather than guaranteeing the functioning of the economy?
(Thanks to James for the link)