Corporate Funding is Doomed!

Yesterday, I read that Fannie and Freddie have move over $10 billion from long-term funding to short-term funding. Here's another story about how the banks won't lend long-term funds to anyone. Bloomberg is reporting that Credit Suisse and Citibanks are raising borrowing costs by tying rates to CDS. Loans used to be based on borrowers' rating and a spread over LIBOR. Now that counter parties cannot be trusted, the banks are forcing the companies to insure the bonds for them. This is the stupidest thing I've ever heard of. It guarantees that any company that has problems will quickly go into a death spiral, causing huge bank losses. It also confirms my belief that LIBOR is a worthless indicator. I refuse to check it any more or read about it. The BDI is a much better indicator of global credit and liquidity.