“Fed launches 2 emergency programs last seen in 2008 crisis”
March 18, 2020
“The first, announced mid-morning, is intended to unclog a short-term lending market for what is known as “commercial paper.” Large businesses issue commercial paper, which is essentially the equivalent of an IOU, to raise cash to meet payrolls and cover other short-term costs.
“An improved commercial paper market will enhance the ability of businesses to maintain employment and investment as the nation deals with the coronavirus outbreak,” the Fed said in a statement.
The second program is also intended to mostly assist the commercial paper market and allows a wider range of financial institutions to access short-term loans from the Fed — in this case investment banks and securities trading divisions of large banks. It also allows them to pledge a wider range of collateral in return for the loans. The funds will then mostly be used to purchase commercial paper…”