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The Fed creates commercial paper−buying facility

Tue, Oct 7 2008, 14:15 GMT
by Marina Schiaffino

FXstreet.com


usdThe Fed has just announced its plan to create a special fund to buy up commercial paper. Once the Treasury Department approves it, it will apply this new regulation in order to keep the credit crunch from cutting off a key source of funding for corporations.

Another emergency move, in order to calm distressed financial markets by preventing "substantial disruptions" to the financial markets and to the economy.


In-Depth Analysis

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Analyst comments

  • Chris Turner, head of FX strategy at ING
    "The issue here is one of institutions struggling to access dollar funding in the overnight uncollateralized market and instead attempting to raise dollar funding through the FX swap or FX cross currency basis swap market." - Dow Jones
  • Cary Leahey, economist at Decision Economics
    "Once again the Fed continues to pull all the levers it can think of and it's thought of a new one in the form of effectively accepting unsecured paper - commercial paper - from a wide variety of institutions. Up until today, the Fed did not make loans without some form of collateral. That has now gone out the window." - Thomson Financial News

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