Can the Fed default?

This is an honest question. Can the Fed default?

I ask because of the following:

Fed offers $200 billion to prop up lenders; Wall Street responds with huge rally
By Jeannine Aversa • The Associated Press • March 12, 2008
WASHINGTON - Staring at spreading financial dangers, the Federal Reserve announced a rescue package yesterday that would pour as much as $200 billion into banks and investment houses and allow them to put up risky home-loan packages as collateral.
[emphasis added]

The Fed is loaning banks money and taking "risky home-loan packages as collateral"????

So... what if the collateral is worthless?

Can the Fed default?

What are the implications of this bail-out?

I'm honestly curious. This sounds really stupid. Am I missing something?

Have a nice day.