I want a loan from the Fed!
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Posted on 10/07/2008 8:29:48 AM PDT by reaganaut1
WASHINGTON — The Federal Reserve announced a radical new plan on Tuesday to jump-start the engine of the financial system.
The Fed said in a statement that it would begin to buy large amounts of short-term debt in an effort to stimulate the credit markets, which have all but dried up.
Under the program, the Fed said that it would buy the unsecured short-term debt that companies rely on to finance their day-to-day activities. “This facility should encourage investors to once again engage in term lending in the commercial paper market,” the Fed said Tuesday in a statement. “An improved commercial paper market will enhance the ability of financial intermediaries to accommodate the credit needs of businesses and households.”
While the move will put more taxpayer dollars at risk, it underscores the growing sense of urgency felt by policy makers in a climate where lending has virtually dried up. The Commercial Paper Funding Facility, “will complement the Federal Reserve’s existing credit facilities to help provide liquidity to term funding markets,” the Fed statement said.
Futures indexes in New York jumped sharply on the news, indicating a higher opening the day after the Dow Jones industrial average fell 800 points before recovering to close down 369 points.
(Excerpt) Read more at nytimes.com ...
I want a loan from the Fed!
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To join, send Freepmail to rabscuttle385.
Since we’ve thrown small government conservatism out the window, I think it’s time we put some measures in place to stop offshoring.
Constitutionality? Oh that’s right, that doesn’t matter. As long as it makes people feel like we’ve avoided a depression.
ping
If Obama wins, we’re in a recession in ‘09 anyway.
I fear that if you don’t let the market go through full corrections, you are just prolonging the inevitable.
And if you’re Congress trying to do this, you are just throwing others’ money at the problem while not actually fixing the problem that caused it in the first place.
Why don't we all just send all our bills to our congress vermin and ask them to bail "us" out?
Ha, you must have posted as I was typing.
Very fitting yet disturbing picture.
“While the move will put more taxpayer dollars at risk, it underscores the growing sense of urgency felt by policy makers in a climate where lending has virtually dried up”
When they say dried up, do they mean lending between banks has dried up? Because I still get offers in the mail for credit cards, mortgage refis, home equity loans, etc. Granted, there aren’t as many as I used to get but certainly, at least for me, the offers haven’t “dried up.”
Gee that pesky Article 1, Section 8 of the Constitution doesn't list Congressional 'lending' as one of the enumerated powers of Congress.
L
I agree. It’ll certainly suck short term, but the longer we put this off, the worse it’ll be.
The root cause of this is our debt and consumption economy that throws credit and liquidity everywhere. We keep propping up instability.
Gee, ya think?
L
That's what the apologists for the billionaire socialist bailout claimed. More Fed credit expansion will only worsen the inevitable economic readjustment when it comes. It will create more malinvestments. We need to bite the bullet now instead of choosing more inflation/socialism/AND economic suffering. BTW, when is the last time that massive inflation cured anything? Give one example.
That's what the apologists for the billionaire socialist bailout claimed. More Fed credit expansion will only worsen the inevitable economic readjustment when it comes. It will create more malinvestments. We need to bite the bullet now instead of choosing more inflation/socialism/AND economic suffering. BTW, when is the last time that massive inflation cured anything? Give one example.
OMG... this is insane.
This is an emergency. Congress doesn’t have time to look through the Constitution and do this by the books. We have to act now to protect the American people. /s
Sadly I wouldn’t be surprised if someone said this.
Below are further details, from http://www.federalreserve.gov/newsevents/press/monetary/monetary20081007c1.pdf .
Commercial Paper Funding Facility (CPFF)
Terms and Conditions
Facility
The CPFF will be structured as a credit facility to a special purpose vehicle (SPV) authorized under section 13(3) of the Federal Reserve Act. The SPV will serve as a funding backstop to facilitate the issuance of term commercial paper by eligible issuers.
The Federal Reserve will commit to lend to the SPV at the target federal funds rate. Draws on the facility will be on an overnight basis, with recourse to the SPV, and secured by all the assets of the SPV. The Federal Reserve will also be secured by other means described below.
Assets of the SPV
The SPV will purchase directly from eligible issuers 3-month U.S. dollar-denominated commercial paper at a spread over the 3-month overnight index swap (OIS) rate. The Federal Reserve will consult with market participants regarding appropriate spreads that are consistent with the facility serving as a funding backstop under more normal market conditions (for example, 100 basis points).
Commercial paper (including asset-backed commercial paper (ABCP)) purchased by the SPV must be rated at least A1/P1/F1 by a major NRSRO and not rated below A1/P1/F1 by any major NRSRO. The SPV will only purchase commercial paper issued by U.S. issuers (including U.S. issuers with a foreign parent).
Commercial paper that is not ABCP must be secured to the satisfaction of the Federal Reserve. The commercial paper may be secured in one of the following ways:
(i) The issuer pays the SPV an upfront fee based on the commercial paper initially sold to the SPV and a further fee based on subsequent commercial paper sales above that amount; or
(ii) The issuer obtains an indorsement or guarantee of the issuer’s obligations on the commercial paper sold to the SPV that is satisfactory to the Federal Reserve; or
(iii) The issuer provides collateral arrangements that are satisfactory to the Federal Reserve; or
(iv) The issuer otherwise provides security satisfactory to the Federal Reserve.
The Federal Reserve will consult with market participants about other methods for issuers of non-ABCP commercial paper to provide satisfactory security to the Federal Reserve.
Limits per issuer
The maximum amount of commercial paper a single issuer may sell to the SPV will be the average amount of commercial paper the issuer had outstanding in the month of August 2008, less any amount of the issuer’s outstanding commercial paper held by investors other than the SPV.
Termination date
The SPV will cease purchasing commercial paper on April 30, 2009, unless the Board agrees to extend the facility. The Federal Reserve will continue to fund the SPV after such date until the SPV’s underlying assets mature.
***BTW, when is the last time that massive inflation cured anything? Give one example.***
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Unusual times...requires unusual steps. This will help the immediate problem, and the Fed (we the people)will actually make a little money on it.
This is good news that will calm the markets considerably...(which will allow McCain to get his message out...)
I submit that we are in recession in '09 no matter who is elected. In fact, I strongly suspect 4Q08 will show GDP contraction.
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