Uh oh...

The TED Spread is up, the Dow is down, Europe is in turmoil, and there is evidence that the money markets are totally frozen. Not what I had hoped to see the Monday morning after the financial rescue plan was passed. Evidence that the plan is not enough to save the banking industry from a lot of pain. But some pain is good and the retrenching that is going to happen is probably healthy in the long run. It's the short run that is still worrying me. Evidence that the recue is not going as hoped: the Fed this morning has had to announce a huge increase in the TAF. There seems to be two possible reasons for all this bad news. One, the Troubled Asset Relief Plan (TARP - or Paulson's Plan) has been judged by Wall Street and banks as terrible insufficient for the existing crisis. Two, a cascade of bad news from Europe has caused a new wave of panic. My opinion is that it is mostly the second reason at the moment (causing essentially the first reason with 'existing' now including Europe). Of course, we know about troubles in Europe already, why this response is the obvious question, to which I can only reply - that is the nature of a 'panic.'

Still, banks can't stay huddled in a corner holding cash for too much longer, they are going to need to start lending soon...aren't they?

I think we need to wait until the end of the week before we start declaring all of these moves insufficient (or misguided). Until then, keep a paper bag handy to breathe into as you monitor the situation...