How risky are the debts markets?

This is like a bad joke - how risky are the debt markets? So risky that if you bought Treasury bills today you would get less than 25 bps for 3 months, four week bills were down to a 4 bps yield. You are getting nothing on your money except the promise that the government will return principal. This is the clearest indication of the extent to where the crisis of confidence is currently at. The stock market is just a signal for what is going on in the debt markets. If you do not want to lend to any firm that has credit risk the place to be is Treasuries. If there is no lending, then some of the basic functions of the financial economy cannot occur.

The action of the Fed to add more reserves does not matter if there reserves are kept in the vault an not used to make loans, and there is nothing the Fed can do to change this view except to provide some confidence by offering backstops to different critical firms. Unfortunately, this localized help in an attempt to provide confidence globally has not been working.