ANTenna Blog -- The rANT

Last week, The rANT said that we would never know if the bailout worked or not. Not so fast. Turns out that there may be some good indicators after all, but today's sickening collapse in the stock market isn't actually the definitive word.

Of course, if this is the scenario WITH the bailout, The rANT would had to see what would have happened WITHOUT it. Could it have been worse than the 750-point nightmare playing out this afternoon> Well, sure it could. Really. No matter how much the markets have tumbled since the bill was signed on Friday, they could have plummeted even farther, even faster.

More to the point, while this kind of market reaction isn't what anyone was hoping for, the "experts" say that the stock market isn't really the issue. In fact, everyone seems to agree that even if it works, the bailout is too little, too late to stop a full-blown recession. The best case at this point is to keep an ordinary recession from turning into something much, much worse.

So, if we're all headed down anyway, how can we tell if the bailout is helping at all?

The SF Chronicle's Kathleen Pender says to look to the credit markets to see whether the bailout is bringing stability or not. The big problem, Pender says, is that "Financial institutions are not willing to lend money to each other - even overnight - because they don't know which ones might be dead the next day." And that "Because banks can't borrow or raise capital, they can't or won't lend, and that's starting to hit consumers, businesses, and state and local governments." So...

"To see whether it's working, you'll have to look not at familiar stock market barometers, but at more obscure credit-market indicators such as Treasury bill yields, the London Interbank Offer Rate, or Libor, and the difference between them."

The AP's Jeannine Aversa says to look for these signposts:

1. The Federal Reserve's weekly report on emergency loans provided to banks and investment firms is a barometer for how strapped they are for cash;

2. Freddie Mac's weekly report on mortgage rates shows what home buyers are being charged to borrow;

3. The Mortgage Bankers Association's quarterly survey of home foreclosures and delinquencies will indicate whether the struggling housing market is on the mend.

As previously noted, The rANT is no economist (we're a bug, for heaven's sake). We can't really tell whether credit is still locked up or not, but the one thing that is clear is that nothing is yet clear.

Finally, Pender offers one more indicator to track how to tell whether the Treasury plan is working: "For starters, the government needs to buy some securities, and fast." She quotes Robert Hansen, senior associate dean of the Tuck School of Business at Dartmouth College: "If they haven't spent at least $250 billion in a few weeks or months, it means they are having too much trouble designing an auction to make this work."

Now that's a switch. Nobody usually worries about whether the government can spend money fast enough!