The Federal Reserve has been flooding the banking system with cash, so much so in the last week that it has pushed the effective overnight interest rate below the central bank's target 2%.

FORBES: Credit Crisis

The three-month Libor is at 3.77%, according to UBS, and the difference between that and the overnight rate suggests "interbank lending is broken, " said William O'Donnell, the head of U.S. interest rate strategy at UBS. Rather than extend credit for longer than overnight, banks appear to be hoarding cash.

FORBES: Credit Crisis