NEW YORK — The Senate's endorsement of the $700 billion financial bailout plan couldn't relax the credit market Thursday, as investors waited for the revised bill to go back to the House.

The market for loans has seized up in recent weeks, sidelining companies and municipalities in need of short-term cash. The worry is that even if the bailout plan is approved, it might not be enough to prevent the economy from falling into a prolonged recession.

Catalyst Energy, a natural gas marketer, filed for Chapter 11 bankruptcy Wednesday after Constellation Energy, the nation's largest independent energy marketer, pulled its credit line. Financial officials in states such as California and Florida have said this week their ability to borrow is threatened. And Thursday, auto parts maker Dana Holding Corp. said it drew $200 million from its $650 million credit facility due to "uncertainty in the financial markets."

The yield on the 3-month Treasury bill was at 0.69 percent, down from 0.79 percent late Wednesday. That shows that demand for T-bills — considered the safest assets around because they are issued by the U.S. government — remains very high despite their meager returns.

The London Interbank Offered Rate, or LIBOR, for 3-month dollar loans rose to 4.21 percent Thursday from 4.15 percent Wednesday. The rise in that rate suggests that banks are getting even more tight-fisted with their cash.

And rates on the short-term corporate debt known as commercial paper also rose again Thursday after pulling back a bit Wednesday.

Over the past week, outstanding commercial paper dropped by $97.1 billion to $1.54 trillion, the Federal Reserve said Thursday. On a seasonally adjusted basis, total commercial paper outstanding fell to $1.61 trillion from $1.70 trillion. Most of the drop was in commercial paper issued by financial companies.

The shrinking of the commercial paper market shows how dysfunctional the overall credit markets have been in the aftermath of the bankruptcy of Lehman Brothers Holdings Inc.

Money market mutual funds — traditionally the biggest buyers of commercial paper — have flocked to the safety of Treasury bills instead of commercial paper after a money market fund "broke the buck" two weeks ago due to its exposure to Lehman. When a fund breaks the buck, it means it does not have enough assets to cover every dollar invested in it.

The tightening in credit isn't just slamming big companies — many small business owners are feeling the effects, too.