The Fed announced earlier today that it would launch the Commercial Paper Funding Facility to help to companies get the short-term funding they need to operate.
The Federal Reserve said Tuesday it is providing help to companies that are having a hard time getting the short-term funding they need to operate., the bank announced a special credit facility to purchase corporate paper from issuers that have been having a difficult time finding buyers on the open market. Corporate paper involves unsecured short-term lending critical to business funding.
"This is a crucial market for basically short-term borrowing by companies, and if you don't get this short-term borrowing, you can't get payments out, you can't pay your employees, you can't pay your customers," Randall Kroszner, a former Fed governor, told CNBC. "If this freezes up, it's a real problem."
The one-day facility announced Tuesday comes under the emergency 13 powers of the Federal Reserve Act and will involve three-month paper for eligible companies. The cost will be the three-month overnight index swap rate plus 200 points.
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