The government is agreeing to pretend that this is more-secured than it actually is, since they’re treating treasuries that everyone knows are worth $85 (or whatever) are actually worth $100. If these treasuries were actually worth $100, the banks could just sell them for that price instead of needing loans. Also I suspect the cost of a loan from someone else would be much more than 1% higher since the banks needing these loans are very bad credit risks (you’d only take this loan if you’re insolvent and hoping no one will notice). The government is taking on a fairly large credit risk in exchange for basically nothing here.
The government is agreeing to pretend that this is more-secured than it actually is, since they’re treating treasuries that everyone knows are worth $85 (or whatever) are actually worth $100. If these treasuries were actually worth $100, the banks could just sell them for that price instead of needing loans. Also I suspect the cost of a loan from someone else would be much more than 1% higher since the banks needing these loans are very bad credit risks (you’d only take this loan if you’re insolvent and hoping no one will notice). The government is taking on a fairly large credit risk in exchange for basically nothing here.