This week, as equity markets went into a tailspin while the coronavirus spread across the globe, the Federal Reserve decided to inject $1.5 trillion into financial markets. The Fed’s rapid action was an attempt to stabilize financial markets in the wake of severe disruptions caused by the COVID-19 outbreak.

In response, Sen. Bernie Sanders (I-Vt.), Democratic candidate for president, tweeted:

When we say it’s time to provide health care to all our people, we’re told we can’t afford it. But if the stock market is in trouble, no problem! The government can just hand out $1.5 trillion to calm bankers on Wall Street.

Meanwhile, Rep. Alexandria Ocasio-Cortez (D-N.Y.) tweeted:

FYI, the amount that the Fed just injected almost covers all student loan debt in the US. There is absolutely NO excuse for not pausing student debt collections, planning for mortgage &rent relief, etc. We need to care for working people as much as we care for the stock market.

But either Sanders and Ocasio-Cortez are being disingenuous, or they have no idea what they’re talking about.

The Fed’s liquidity injection is not a handout. It is just like any other form of debt. The Fed is loaning reserves to banks in exchange for collateral. In this case, the liquidity injection will occur via the “repo” market. This is the market for so-called “repurchase agreements” between dealers and financial market participants.

As the New York Federal Reserve announced, the Fed offered three tranches of “repo” injections, each worth $500 billion. The first two came on March 12 and 13. The final would be phased in over the rest of the month. Meanwhile, the Fed would continue to offer daily overnight (at least $175 billion) and two-week (at least $45 billion) “repo” operations.

The nature of collateral sold by the banks includes typical assets like government debt and asset-backed securities. The prices reflect market expectations about what the federal funds rate would be over the course of the “repo” operation.

Why the repo markets? Repos are a standard, convenient way for banks to acquire short-term cash. They are also one of the common tools used by the Federal Reserve to intervene in financial markets. Here’s how the repo market works in this context.

In a typical transaction, banks sell collateral to the Federal Reserve under an agreement to pay back the reserves at a later date. The price at which they sell their collateral to the Fed is typically lower than the price at which they will buy it back. The difference in price is called the implied interest rate, also known as a repo margin, or even more concisely, a “haircut.”

The repo market functions like any credit market. The exact details of the transaction differ from, say, a student loan, but the principle is the same. There is no handout. There is simply a loan whose price is the rate of interest—derived from the difference between the price at which banks sell collateral to the Fed and the price at which they buy it back.

Repo markets are attractive to banks as a way to obtain short-term cash when reserves are running low. In such cases, perhaps because they have overextended themselves on loans, they can turn to the Fed for a short-term loan to cover cash flow needs. The price they pay is the repo rate. Like all credit markets, there is no free lunch. Interest rates cover the cost associated with the risk of counterparty defaults, similar to how interest rates on student loans reflect the risk of students not paying back their loans.

Of course, it’s not exactly like student loans because the specific nature of the transaction is different. The repo margin, or “haircut,” is affected by risk factors such as the length of the repurchase agreement, the quality of the collateral, the credit quality of the counterparty, and basic supply and demand. But the underlying principle of extending credit at a price reflecting risks is the same.

Unfortunately, Sanders and Ocasio-Cortez are engaging in the same kind of rhetorical sophistry that is characteristic of President Trump. Stoking divisions to score political points at the expense of misinforming the public about how financial transactions work is not the best way to build an effective coalition of political factions interested in the common goal of expanding access to health care, alleviating student loan debt, helping people pay their rent and bills, and addressing the COVID-19 pandemic.

And by the way, according to an initial report in the Wall Street Journal, banks have not rushed to the Fed for reserves. In other words, the $1.5 trillion supply of “repo” loans has far exceeded demand so far. Perhaps because it is not, in fact, a handout.