"Put simply, the government is draining money from the private sector and uses it to plug the holes in banks’ balance sheets. Ceteris paribus this will reduce economic growth. There is a solution, however, which would enable the government to achieve its goal to support the economy, without negative side-effects on private demand: Instead of the government, all measures to support the banking system through asset and equity purchases, as well as compensation for depositors, etc. should be defrayed by the central bank for its own account, and not become a liability of the government. In addition to avoiding increased national debt and the compounding interest on it, this would not result in any crowding out of private demand."
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