The TED spread (the difference between 3-mo. Libor and 3-mo. T-bill yields) continues to narrow, falling to 108 bps today. This is direct evidence of improving confidence in the health of the banking system, since it primarily reflects a market that is willing to accept a lower and lower yield increment in order to place money with banks rather than with the U.S. government. It is still abnormally high, to be sure, but this chart should make it clear that the improvement in recent months has been dramatic.
Restoring confidence in the banking system is an essential part of the recovery process, and we continue to make significant progress to that end.