When Ray Davis applied for his loan, he expected the application to be a 200-page document that might take weeks to fill out.

It turned out it was only two pages long. Davis was shocked. The two pages had a lot of white space.

Americans have heard about some banks’ lax subprime-lending practices, where some financial institutions barely even bothered to ask about things like a borrower’s income, let alone verify it.

So maybe Ray Davis’ loan process wasn’t so unusual.

There is one thing, though.

Ray Davis wasn’t applying for a subprime mortgage. Ray Davis is the chief executive at Umpqua Bank. He was applying for the government’s TARP Capital Purchase Program.

It just so happens that Umpqua Bank was a healthy bank. Its financial strength exceeded the regulatory requirements for a “well capitalized” institution at the time of its application.

The same can’t be said, of course, for some of the other TARP recipients, like Citigroup (NYSE: C) or AIG (NYSE: AIG).

As an investor, I didn’t like most of these companies. Taxpayers might like them even less. But that doesn’t mean we still can’t profit from them — if in a round-about way.

In troubled times, governments become the lenders of last resort. Governments are able to backstop crises because of their ability to issue high-quality debt. In the United States, this debt is issued in the form of U.S. Treasuries. These instruments aren’t even rated by companies like Fitch, Moody’s or Standard & Poor’s. They carry an “implied” AAA rating.

Now, the Great Recession has offered no shortage of financial and economic troubles, which means the U.S. Treasury has been busy issuing debt. This is easy to quantify: At the end of August, $6.9 trillion in marketable Treasury securities was outstanding, an astonishing +41.4% increase from a year earlier.

• Would You Lock Up Your Money for Less Than a 1% Yield?

The three-month Treasury has a current yield of 0.7%, which hardly seems worth the trouble. The 10-year bond is only offering 3.4%.

#-ad_banner-#So far, demand for Treasuries has been decent as risk-averse investors seek safety over return. But as the supply of new U.S. debt continues to grow, will investors continue to buy at these paltry yields — especially when the economy appears to be in recovery?

I strongly suspect that, to attract buyers, Treasury prices will have to fall — and yields will have to increase. This is why I like ProShares Short 20+ Year Treasury (NYSE: TBF). TBF is an exchange traded fund (ETF) designed to track the inverse of the 20-Year+ Treasury bond index. In other words, when Treasury prices fall, this ETF is designed to rise.

Investors should understand there are inherent risks associated with inverse and leveraged ETFs, as I’ve outlined in this article. But recent headlines convinced me this may be a risk worth taking.

• More Fuel for the Fire Sale?

When subprime lenders collapsed, the Federal Housing Administration (FHA) stepped in. For instance, the FHA insured 3% of mortgages in 2006. Today that number has grown to nearly 25%. Almost one in five of all FHA borrowers are at least one payment behind on their mortgage or are in foreclosure as the rising unemployment rate takes its toll. The FHA recently said that its cash reserves had fallen below mandatory levels for the first time in history.

Two more banks failed last week, costing the Federal Deposit Insurance Corp. (FDIC) $850 million. All told, 94 banks have failed this year, and there are 400 institutions on the government’s “troubled bank” list. FDIC Chairman Sheila Bair wants to avoid exercising the agency’s $100 billion line of credit at the Treasury.

As much as I’m rooting for Ms. Bair, investors might be better served by putting their money on TBF.