"There is ... [a] key difference between European banks' need for dollars and many emerging markets' need for dollars. European banks need dollars to finance their holdings of US mortgages and other US securities. If they didn't have access to dollar financing, they would either have to borrow euros and buy dollars - pushing the dollar up (and hurting US exporters) or they would have to dump their US assets (hurting US banks holding similar assets). By lending to European central banks who then lent to their own banks, the US kept some European banks from being forced sellers of risky US assets - and in the process putting pressure on US banks. The US wasn't acting entirely altruistically.
Emerging market banking systems by contrast often need dollar financing not to support their portfolios of US assets but to support their domestic dollar lending."
John Mauldin's 10.20.08 newsletter
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