Shoring Up the Commercial Paper Market

Lynne Kiesling

In light of Tyler’s observation yesterday that things are going badly if the Fed guarantees commercial paper, I offer without comment this news item:

The Federal Reserve announced Tuesday a radical plan to buy massive amounts of short-term debts in a dramatic effort to break through a credit clog that is imperiling the economy.

The Federal Reserve, invoking Depression-era power under “unusual and exigent circumstances,” will buy “commercial paper,” a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls.