This is his claim:
The government, under the auspices of the Federal Reserve, lends money to the bank at a near-zero interest rate. The bank then lends it back to the government at 2 or 3 percent, and the “profit” is paid back to the government in repayment of the “investment” the government made.
Read more: http://www.politico.com/...
It is clear what he is saying. Cheap money loaned by the Fed is then used to buy US Treasuries with at least a 10-year maturity (2% yield).
However a look at the PRIMARY source says something completely different.
Loans
Primary credit 30
Secondary credit 0
(in millions).
http://www.federalreserve.gov/...
This is the primary source and it is dated June 26, 2014. There are no loans to the TBTF banks that would allow them to recoup the TARP interest they paid.
In response to the improvement in financial conditions, on November 17, 2009, the Federal Reserve announced that the maximum maturity on primary credit loans would be reduced to 28 days effective January 14, 2010
On February 18, 2010, the Federal Reserve announced that typical maximum maturity on primary credit would be shortened to overnight, effective March 18, 2010.
http://www.federalreserve.gov/...
So there is a total of $30 million in loans that must be repaid in under 30 days. A $100 billion Treasury invested for 10 years would only yield $2 billion. $30 million in overnight loans is insignificant!
There are no loans that would allow a 2-3% yield. That is the bottom line. Stiglitz no doubt is aware of this. Therefore he is being intentionally misleading. He is lying.