If anymore big banks collapse will corporate lending come to a screeching halt?

Oldman answered one month ago …

Today-092908 - the credit spread between Libor and corporate rose to it's highest in history. That simply means that a company with AAA credit needs to pay 200+ basis points above what lenders can make on gov't issued short term bonds to get a loan.

This' causing a very severe market contraction and capital shortage, because Joe's Dry Cleaners on the corner may not have a AAA rating, but needs to put in it's usual 3 mo. supply order for solvent and plastic bags. It means that Sam's Deli on the other corner, can't get a 90 day loan to pay to have it's central A/C System fixed, so it doesn't drive the diners nuts...etc. It means that contractors for the new stadium can't pay for supplies in time and the hometeam will be running around the gravel field...it means the commerce of the countries: U.S., U.K., Spain, Denmark, Germany, France...is grinding to a halt. It means demand destruction for commodities...increasing unemployment, etc.

The theory is that the BIG Banks lend to Smaller Banks...etc.

But none can lend because their asset base has been downgraded and devalued, and their capital requirements have been increased, and they're scrambling to get capital, and as BIG Whites of the world, they're feeding on the larger predatory fish, and the larger fishes are busy trying to merge with the sardines of the banking community, while the shrimp and krill of this monetary ecosystem are in a panic, and the plankton, such as you and I, are still hostage to the tides and sun.