If the US treasury had to pay 20% interest in $18 trillion, the interest payment of $3.6 trillion would exceed all tax revenues.

Hopefully with the Treasury now standing behind Fannie Mae and Freddie Mac some stability will return to the markets.

As atarget mentioned, it may take the form of an RTC type of entity that address the S&L mess.This plan if passed would raise our national debt from $10.6 trillion to $11.3 trillion to make room for the massive rescue.However, as of this morning the proposal does not specify what the government would get in return from financial companies for the federal help.Something mentioned by Treasury Secretary Paulson should be considered; "I am convinced that this bold approach will cost American families far less than the alternative — a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing."

Treasury yields have crashed as the Fed has taken the Federal Funds Target Rate to a range of 0-0.25%.

This is because the stock market is being influenced by artificial methods of the federal treasury, creating billions of dollars in a program known as Quantitative Easing.

The bankers and loan committees are thus faced with the choice of making a loan that will eventually require the bank to raise more capital or set aside more reserves OR buy essentially riskless but low paying Treasury Securities.

Over $500 billion worth of Treasury bonds trade each and every day.

Mortgage rates seem to be closely tied to the ups and downs of the 10-yr treasury bill.  

Many (not all) of the ARM resets are tied to the 1-year Treasury Bill index.

I used treasury notes as a safe comparison, but you can find the blend of investments that give you better yields while still preserving liquidity.