Borrowing from Peter to pay Paul?

American Dollars to prop up the Euro:

Central Banks Act in Concert to Ease Fears on Europe Debt

FRANKFURT — Worried that Europe’s debt impasse posed a growing threat to the global financial system, the world’s major central banks moved Thursday to assure that European banks would not run short of cash as troubled nations like Greece and Italy sought to stabilize their economies.

The central banks, in a coordinated action intended to restore market confidence, agreed to pump United States dollars into the European banking system in the first such show of force in more than a year. Some banks have found it hard to borrow dollars as American lenders grew nervous about their financial condition.

Thursday’s action, coming almost exactly three years after the collapse of the investment bank Lehman Brothers, lifted global stock markets, sharply increasing the value of shares in banks heavily exposed to debt from Greece and the other struggling members of the euro zone. The euro, which had been falling in recent days, rebounded.

The central bank action came as European finance ministers and other policy makers were gathering in Wroclaw, Poland, for meetings on Friday and Saturday. The United States Treasury secretary, Timothy F. Geithner, who was scheduled to attend, was expected to urge European officials to act more aggressively to contain the sovereign debt crisis, which has already begun to undercut growth in Europe.

While the move will relieve some pressure on troubled banks, it does not address the underlying problems that made it difficult for the banks to borrow dollars on their own.

[...]

The European Central Bank said it would allow banks to borrow dollars for up to three months, instead of just for one week as before, giving them breathing room for the rest of the year. The E.C.B. said it was acting in cooperation with the Federal Reserve of the United States, the Bank of England, the Bank of Japan and the Swiss National Bank.

In recent days some European banks have faced difficulties in borrowing dollars, whether from other banks or from money market funds in the United States. There was fear that if they could not borrow dollars, they would be forced to cut off loans to American companies or sell dollar-denominated assets, perhaps forcing prices down in already unsteady markets.

The move was possible under deals between the central banks that were already in existence, and the Fed saw no need to make an announcement on Thursday.

While there now is more certainty that banks will have access to funds, deeper issues remain unresolved, including whether they have enough capital to withstand a possible default by Greece on its government debt.

An official forecast warned Thursday that growth in Europe would come “to a virtual standstill” toward the end of the year. It predicted, though, that Europe would just barely avoid a double-dip recession.

[...]

Analysts said they expected Mr. Geithner to press European ministers in Wroclaw to increase the resources available to their bailout fund for the euro zone countries. But even the expansion of the fund to 440 billion euros ($611 billion), agreed to in July, has yet to be ratified. There is some worry that countries guaranteeing the bailout fund might themselves face doubts about their own credit. [...]

Gee, ya think?

Worried about losing your high credit rating? Just borrow from somebody whose already lost theirs.