Investors run to T-bills, banks get stingier

The credit markets showed no signs of easing Monday as the government's financial bailout plan headed to a House vote _ investors again rushed for the safety of Treasury bills, while banks charged more to lend to one another.

The yield on the 3-month Treasury bill sank to 0.37 percent from 0.87 percent on Friday, showing that investors were prepared to get virtually nothing in return for their investment besides security.

And the LIBOR, or London Interbank Offered Rate, for 3-month dollar loans rose to 3.88 percent from 3.76 percent, suggesting that banks are growing increasingly unwilling to lend to each other. LIBOR for 3-month euro loans soared to 5.22 percent, the highest rate ever.

These two measures of the credit markets, where corporate borrowers go to find loans, indicated that the fear that has been gripping the world's financial system is far from alleviated.

On Monday morning, the government's $700 billion bank bailout plan cleared a key procedural hurdle on the House floor _ the plan will like be voted on by Monday afternoon, and then go to the Senate later this week.

But the reworking of the U.S. financial landscape continued, with Citigroup Inc.'s government-brokered acquisition of Wachovia Corp. and Mitsubishi UFJ Financial Group's $9 billion investment in Morgan Stanley.

Those two developments follow Washington Mutual Inc. becoming the largest bank to fail in U.S. history; Lehman Brothers Holdings Inc. becoming the largest company to file for bankruptcy; the government takeover of American International Group Inc., the world's largest insurer; and Bank of America Corp's shotgun buyout of Merrill Lynch & Co.

The mortgage crisis is rippling through Europe as well. The British government is nationalizing the troubled mortgage lender Bradford & Bingley, while Belgium, the Netherlands and Luxembourg agreed buying a 49 percent stake in Fortis NV for $16.4 billion.

And in a sign that the U.S. economy is still weakening, the Commerce Department said consumer spending was flat in August. That was the worst reading since February, when spending was also unchanged from the previous month.