He said "there is nothing to look at" while it was has been addressed centuries ago . Actually it is not true. He just does not know about what was written about that problem, probably because his knowledge is limited to what he received in an economics/business school. The root problem is that money is given a cost, there is a dichotomy between borrowers and lenders, and banks earn from interest. Change the model to something like: (1) zero interest, (2) borrowers give cash/ lenders give sweat, and both are paid from profits, and (3) banks make money from actual work done to conduct financial services transactions, so a banker would become like other professionals where his earning is limited by the product of his effort and the value of one time unit of his effort (like in other businesses). When interest is zero, the banker cannot anymore use money leverage to earn.
The government is the only one who can be the borrower of last resort. This presupposes two things: 1 - A solvent and creditworthy government. 2 - An economy dynamic enough that its only problem is a lack of liquidity caused by a financial crisis. Japan had 1 but not 2, and now hardly has 1, after all these years of attempting to start an engine that, because of 2, simply didn't have enough juice left in the battery to crank itself back up. Ahead of time, you never really know if you have 2, of course. All you can do is fill up the tank, hit the accelerator and hope your battery's still got juice.
The Fed isn't the Treasury; it makes a profit and returns that profit to the Treasury. It's a bank. What it can do is in the name: Federal Reserve. It's the reserve that backs up the reserves of all the other banks, the one they can go to when they're suffering from a run. It was originally meant to do the job the FDIC does today: prevent contagious bank runs. It failed in that job, and so the FDIC was created. But for its member banks it still acts as a backstop for them when they can't get money any other place. So, it can be and is supposed to be the lender of last resort. It can't be the borrower of last resort, because it just doesn't have the resources the Treasury has at its disposal.
You allow banks to borrow at close to 0% and then allow the banks to purchase treasuries that pay 4% Free money to "re-capitalize" the fools without creating inflation. Nice ponzi scheme payed for by the average joe the plumber idiot who thinks his republican congressman is the second coming of Christ.