What was behind the Federal Reserves Oct. 7 plan to buy up commercial paper?
The central bank is stepping in as a buyer of last resort in the $100-billion market for commercial paper. This is a form of short-term debt that thousands of companies use to finance their daily operations, including paying employees and buying supplies. The Fed hopes to kickstart this market and free up funds for corporations. The central bank said it was taking the action because money market mutual funds and other investors were loathe to buy commercial paper. Ian Stannard, a currency strategist at BNP Paribas in London, described the move as “probably the first piece of news we’ve had that starts to address the underlying problem in the financial system. This is a very proactive step and will be a huge help to getting things moving again. What are the specifics of the plan? Using Depression-era powers, the Fed will create a new temporary lending vehicle that eligible companies can tap for short-term cash (IOUs of less than three months). In return, the Fed will collect fees and in
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- What was behind the Federal Reserves Oct. 7 plan to buy up commercial paper?
