He said today that the Fed would begin buying commercial paper in hopes of thawing credit markets.
Banks have been curtailing backup lines of credit for commercial paper.
Some were created by the Fed's myriad loans to banks, issuers of commercial paper and others to unfreeze the credit markets.
The move to loosen up the commercial paper market came after morning indications showed credit conditions remain under enormous strain.
The Fed's move to loosen up the commercial paper market came after morning indications showed credit conditions remain under enormous strain.
Big business finances their revolving credit needs by issuing commercial paper.
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The credit market issues have forced companies still issuing commercial paper to issue it overnight or in terms shorter than 90 days.
It concerns credit risk, which previously loomed small with commercial paper, because the issuers carried high ratings and the maturities were so short.
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Instead, the markets came up with the right reform: Such paper had to be backed by ironclad lines of credit from commercial banks.
Moreover, providing liquidity to financial institutions does not address directly instability or declining credit availability in critical nonbank markets, such as the commercial paper market or the market for asset-backed securities, both of which normally play major roles in the extension of credit in the United States.
Still, a slight uptick in credit-market yields indicated that some of the natural buyers of commercial paper might be creeping back into the market.
But because of the fear in the credit markets, including concern that debts won't be repaid, the commercial paper market has all but frozen.
But it is too soon to tell whether the vehicle will ever be restored to its former pre-credit-crunch glory, when it was able to issue short-term commercial paper to fund its investments in asset-backed securities.
" Correct answer: "The balance sheet of Ford Motor Credit has deteriorated to the point where it is at constant risk of being pushed out of the commercial paper market.
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