This freaked me out a bit, to be honest. I think the banking system may be officially insolvent:

Notice the amazing drop off in non-borrowed bank reserves


Notice also that the gap is being filled by the fed


...so the fed's liquidity is not going to the real economy but is just filling in the black hole in bank's balance sheets, to try to support lending.

And a good explanation here:
http://www.greenrushcapital.com/fed.html

Any ideas anyone? Have I got the wrong end of the stick?