We’re in another downward spiral. The TED spread, which measures the difference between three-month Treasurys and the three-month Libor rate is back over 200 basis points and U.S. bank stock indeces are plummetted. The KBW Bank Index is off 7.85% to 37.43 at 10:19 a.m. ET.

This is all following last week’s decision by Sec. Henry Paulson to ditch asset purchasing as part of TARP. Investors had been expecting the Treasury to take toxic assets off bank balance sheets. That’s not happening anymore.

Now there are even some market observers wondering if the Fed could become insolvent.

What is striking to me is the distinct lack of appreciation for the proper value of assets today. When you look at certain asset classes, you see that their intrinsic value is in no way being reflected by their current price. Good is getting dumped with the bad. Low prices are being buckshot across all markets. The old adage of keeping your head and investing with prudence is just being ignored today.

This is a bad scene. It means when you approach an investor with a sound idea and a sound business plan, he looks at it and says, “so when will this go bankrupt.” Someone commented on Calculated Risk that people need to “eat, need electricity, and have to drive to work or the unemployment office,” so his investment strategy will stick to that axiom. There are a lot of things people “need to do.” I just hope investors can realize all of them — and do so quickly before the TED spread spikes above 400 again.