LIBOR and the Fed Funds rate are two measures of how much banks charge to lend each other money. Bloomberg reports Libor Rises Most on Record After U.S. Congress Rejects Bailout:

The London interbank offered rate, or Libor, that banks charge each other for such loans climbed 431 basis points to an all-time high of 6.88 percent today, the British Bankers’ Association said. The euro interbank offered rate, or Euribor, for one-month loans jumped to a record 5.05 percent, the European Banking Federation said. The Libor-OIS spread, a gauge of the scarcity of cash, also increased to an all-time high.

6.88 percent isn’t just high, it’s literally off the chart.

I can’t actually find an article on it, but the Fed Funds rate was about 6% this morning. Since the Fed set the target rate to 2%, they’ve opened the repo desk. That will bring it down, but it’s work. I’m expecting some more creativity from the Fed soon. I claimed they were out of ammo, but I’m also a realist: Never count out the Government when it comes to cooking up zany schemes.

Note that there is also the Fed Discount rate. Banks can go directly to the discount window if they need to. Typically, that’s more expensive than bank-to-bank lending. There was also historically a stigma attached to borrowing from the discount window. I’ve heard that the stigma has faded in the last 12 months.

Who Cares

The LIBOR is used as a benchmark rate for many mortgage resets. Having an ARM indexed to LIBOR is not going to be fun come reset time. Credit card rates are also typically dependent upon LIBOR, though not as explicitly as those mortgages. The point is that consumers are going to be feeling the pain. I just heard on CNBC the claim that the average consumer has $9,000 of credit card debt. Wow, that average consumer is screwed.