The good news? The credit markets are loosening up and banks are lending again. The bad news? They're lending to themselves.

Bank of America and other banks are pumping $1.28 billion into the ailing bank's state-of-the-art ultra-green skyscraper in midtown Manhattan, more than the original amount secured for the building's construction. Bank of America is footing the bill for half of the current loan; the other half comes from Bank of new York Mellon Corp., Wells Fargo, Westdeutsche Immobilien Bank and Helaba Bank.

It's being touted as the first major real estate financing deal to go through since the bottom fell out last year, which is, of course, encouraging news. It's also a source of $30 million a year in revenue for the city and the state, much of which goes to funding the MTA--aka, New York's desperately (and, IMHO, infuriatingly) rusty transit system. So, infrastructure support for public transit. Again, a cause for celebration.

But there's something unsettling about the nature of the recipient. Doesn't Bank of America owe the government some $45 billion? How could they possibly lend hundreds of millions of dollars to themselves at this point--for real estate, of all things? I bounced the idea off Steve Ellis, VP at Taxpayers for Common Sense. Here's what he had to say on the matter:

On the one hand, credit markets are easing and you’re able to get a loan through, and that's good. But I don’t think most Americans thought it would be a bank that would be getting the loans. Bank of America is refinancing this amazing new building in the Manhattan skyline, but whether we like it or not, we’re major investors in Bank of America. And while other Americans are in danger of losing their homes, they're refinancing their new fancy home. It’s kind of a who’s who of bailout recipients that are doing the lending. This really flies in the face of the rationale of the bailout.

OK, as suspected. But what if we give them the benefit of the doubt? What about the possibility that this is a necessary investment that will make them better equipped to actually pay back that bailout money?

It really looks like a very small silver lining. There even seems to be debate over how many vacancies there are in the building. But really, you’d hope they’d be putting this money out into commercial and residential sectors throughout the country.

So on the spectrum of outrages, where does this one land?

People tend to see the jets and the getaways, and that provokes outrage because it's so visible. This one, you’re talking about a bigger chunk of change, plus you’re talking about a bunch of banks who have gotten TARP money. These were among the original nine, and they're lending to the bank that has gone back to the trough the most. So, yes, it'll probably get some traction. But there are much bigger problems that go under the radar because they're just so hard to wrap your head around: how firms have been hired to manage bailout money or the Fed’s regulations, for example.

Update: Thanks, ka5s. Typo noted and corrected.