Oops. Bailout Not Working. Should We Scrap And Start Again?

We’ve finally agreed on a bailout, so the world’s safe, right? Nope. The credit markets couldn’t care less. In fact, the TED Spread–which reflects how much banks have to pay to borrow from each other–got even worse this morning. LIBOR is higher. The 3-month Treasury yield has dropped again. And the DOW is down 300+ points.

So the Bailout news hasn’t done it (and if the market thought the bailout would work, the markets would have reflected that.)  This suggests that the government will have to do even more.  Which it has already started to do.

At 10AM, the Fed and 9 other central banks responded by announcing another MASSIVE liquidity injection. The market rallied modestly on this news, but not much.

Part of the problem is that the crisis has now spread to Europe (Fortis, etc.).  The economies of UK, Germany, etc., were already following ours into the tank. More bank failures won’t help.

See Also: But Will The Bailout Work? Not Soon, Says Analyst

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