Is the Fed's exchange policy slowing foreclosures or accelerating them?

There's a number of articles and headlines about levered hedge funds on or past the brink of shutting down due to over-leverage and illiquid markets. Carlyle is the one getting all the air time on CNBC but there's another handful that are in dire straits.

The Fed is encouraging banks to put up any old piece of paper as collateral to borrow treasuries. By foreclosing on a fund that may or may not be able to exit their positions in a timely fashion, the bank immediately realizes the market value of the portfolio and gets treasuries (which are cashable) on the spot.

There's been a hedge fund bubble of sorts the last few years. A friend of mine had a theory that it made it much harder to make money in stocks -- that we were all in the same ones, we all had the same stories, we were all doing the same thing... and we'd all fall all over each other getting in and out. He called it "rule 8000", referring to the 8000 hedge funds reportedly in existence at one point.

"Why is AAPL down on such good news?" I'd ask him.
"Rule 8000" was the inevitable response.

I wonder if that becomes rule 4000 before this is all said and done.

It almost seems like the Fed is accelerating the problem near-term... and maybe that's a good thing. The sooner we deal with the consequences of all the excess the better. We can't move on without moving through it.