The TED spread bounced off 355 basis points this morning, currently "down" to what would've been a four-alarm fire at 327. This indicates a near-refusal of banks to lend to one another as the market becomes less, not more, transparent. Separately from the bailout, the Fed has just pumped another US$330B into the money markets:
WASHINGTON (MarketWatch) -- The Federal Reserve and other major central banks took unprecedented steps Monday to pour hundreds of billions of dollars in additional liquidity into money markets left paralyzed by fears of further bank failures in the United States and Europe.Dr. Roubini notes that the risk of systemic financial meltdown is as high as ever, if not higher. Mish says "the closer one looks the more one can see that Nancy Pelosi and Barney Frank gave in to every wish of the Treasury" and has a set of phone numbers to fax and call against it. Karl Denninger has a video here as part of his post here (but the video is standalone) talking about why this won't work; if you know people who won't read things but will watch videos, well, send it to them.
The Fed said it was boosting the size of its dollar swap arrangements to $620 billion from $290 billion previously. The agreement, with nine central banks, allows authorities to provide short-term dollar loans to commercial banks in an effort to ease short-term funding woes that have resulted from reluctance by commercial banks to lend short-term funds to each other through the interbank market.
Wachovia Bank was taken over today by Citibank through a very suspect FDIC action that the FDIC claims was not an FDIC intervention but also oh yeah the FDIC is on the hook for up to $42B in losses; they also say Wachovia was sound. What? Is this even supposed to make sense?
NASDAQ down 4% or so; S&P 500 down 3.5%; Dow's doing better(!) down only 2.5% or so. If this was an airplane I'd be grabbing parachutes.
None of these concessions seriously cripples Mr Paulson’s flexibility or the programme’s appeal to the industry. He can structure the warrants to be painful or painless. The provisions on executive do not seriously hinder companies’ ability to hand over fat paycheques. The prospect of higher taxes five years from now should not affect a firm’s decision on whether to participate today.Another week, another round of kabuki theatre, another round of unconscionable accumulation of executive power.