Is Six Weeks Too Long?

The TED spread continues to widen today to nearly 400 basis points, as sign that credit is simply not being made available at anything but exorbidant prices worldwide. Bailout bill or not, credit is even less available today.

The question: Is the six weeks to get TARP up and running going to be too long?

Today started with a bad sign. There’s an old adage in banking that says, when a bank has to say it is in good financial standing, it usually is not. We’ve seen this adage proven true time and again during the credit crisis this year. This morning, the federal government said it was on top of the financial situation, which essentially means it is not. That is because nothing is in place yet, not TARP, not the other elements of the bailout bill. To quote from the President’s Working Group on Financial Markets:

“These new authorities will be employed in conjunction with existing authorities to restore market confidence by strengthening the balance sheets of financial intermediaries and improving overall market functioning.”

The operative phrase here is “will be employed.” Treasury has said that it will take about six weeks to get TARP up and running. Those will be six long weeks, during which the TED could jump more. Yesterday’s weekend broadcast news programs showcased the economic slowdown at dealerships. The auto industry, in some ways, is at the edge of the spear of an economic downturn. As the slowdown pervades other industries, the overall economy will continue to grind down, and that will engender a global economic malaise. And all because the financial services industry allowed lenders to make no-doc, option ARMs at 97% LTVs.