Wot no liquidity?

The FT announced:

Fresh emergency action to pump funds into the money markets was announced on Friday night by the European Central Bank amid renewed fears that liquidity in the credit markets is again starting to dry up.

This is beyond a short term hickup. It will change how Banks view liquidity risk going forward in a profound way. The forced reintermediation of recent months will become voluntary, leading to falling securitisation volumes and less off balance sheet activity:

Mr Trichet hinted that he expected financial turmoil to result in structural changes, saying banks’ losses “may trigger a reassessment by some of them of the suitability of the so-called originate-and-distribute business model”, which relies heavily on loan securitisation.

Update. The FED is at it too. This is really really not a good sign.