I would hope they paid off TARP. When the Fed prints and loans you money at less than 1% and you then loan it back to the Treasury for 3% you are making a 2% margin at zero risk. The Federal Reserve, the Treasury, and Congress colluded to give the banks the money they used to pay off TARP. Unfortunately for Main Street the game continues allowing the banks to make record profits and Main Street to pay in the form of energy and food price inflation as well as a devalued currency.
The fact they know the government and taxpayer are backstopping them allows the banks to continue gambling with derivatives far beyond the value of the assets they hold on their balance sheets.
Main Street is also continuing to pay for the Fannie and Freddie write downs. GM also continues to draw on the government account for its working capital.
Sounds like a great deal! How many trillions are the banks borrowing for this arb?
As far as risk free, you obviously don't understand interest rate risk. Or yield curve risk.