Yes, your whole first paragraph is erroneous. They made a $235 million purchase of loans, with $15 million of their own money and $220 million of the Fed's; according to Taibbi the loans were on commercial real estate and student loans. All of the loans were collateral for the $220 million loan.
I would be happy to see some transparency on what exactly they bought, although it can get very complicated. You or I, with our experience in finance might understand it; Taibbi would be lost. I don't want to turn this into a lecture on CMBS (collateralized mortgage-backed securities), so I will use the broad brush.
Basically Wall Street would fund a pool of commercial real estate loans; for ease of figuring we will assume $1 billion. Let's say for simplicity's sake that the average interest rate is 5%, so that the annual interest from the pool is $50 million. What the Wall Street wizards do is strip off the first, say $30 million of that and turn it into the security for a bond. Because it gets first call on the money, 40% of the loans would have to be in default before the people who invested in that bond would suffer any loss of interest. Therefor the bond would be very highly rated, say AAA, and would carry a much lower interest rate than the rest of the pool; say 4%. Thus, they could sell the bond for $750 million ($30 million divided by .04). Then they take the next $10 million of the interest and turn that into another bond. Because this is a riskier investment, the rate on that bond might be 5.5%, which they sell for $181 million. The final $10 million is riskier still, and it might demand a rate of 7.5%. So that piece sells for $133 million, and at the end of the day, Wall Street has turned a $1 billion pool of loans into $1.064 billion of bonds, with the $64 million representing the profit on the deal
Again, that is a very broad brush look; ignoring pesky little things like amortization. So the question becomes which piece (usually called a tranche) did they buy, which pool, what loans are in the pool, how are the underlying properties performing, what sort of discount did they get on the face value of the bonds, etc. If they bought one of the junk tranches (which are the toughest to sell and the most risky in a bad economic climate), they might conceivably have bought $1 billion in face value and might have lost it all. Well, not it all, mind you, as Taibbi notes that $70 million has been paid back to the Fed.
In short, though, it's a very complex transaction, especially once you get into the real-world analysis of the individual properties. Taibbi's brush is much broader than mine and I hope that's just because he doesn't understand what he's talking about.
