Wider Confidence Lifts Economy From Winter's Deep, Dark Freeze

By Neil Irwin and David Cho
Washington Post Staff Writers
Thursday, May 21, 2009

The financial system, frozen solid for the past nine months, is in a spring thaw. And it's happening even though many of the Obama administration's major rescue programs have yet to get off the ground.

The improvement reflects the combined impact of a wide range of actions, many of them taken with little public attention, according to government officials and private economists. But more important than any single program, the sources say, is a deepening confidence from financial markets that the government is prepared to take aggressive action -- a confidence that Obama officials have repeatedly worked to cultivate in speeches and public appearances.

Since early this month, major banks have raised or said they would raise $56 billion in private capital -- the type of surge that Federal Reserve Chairman Ben S. Bernanke said in March would signal the financial system is recovering. The premium that banks charge to lend to one another, another sign of the system's health, is at its lowest level since the financial crisis began in 2007, based on one key measure.

The Standard & Poor's 500-stock index is up 34 percent since March 9, and a measure of stock market volatility this week hit its lowest level since the financial crisis deepened in September, indicating that investors think the market's wild gyrations will be more subdued.

(More here.)