Yes, Closing that Barn Door Will Stop that Cow

The Federal reserve is bailing out the commercial paper market.

Maybe, if they hadn’t allowed these short term debt markets to grow into a largely unregulated sh%$ show of other $1 trillion, they would not have to be bailing them out now:

The Federal Reserve said it would start making loans to American corporations, relaunching a crisis-era tool to help calm short-term debt markets that have faced intensifying strains in recent days.

The Fed trained its sights Tuesday on dysfunction in the $1.1 trillion market for short-term corporate IOUs called commercial paper. Companies use commercial paper to finance their day-to-day business operations such as payroll expenses.

While the Fed can’t buy corporate debt or lend directly to households and businesses, it can invoke emergency powers to establish lending facilities that, in turn, extend credit.


In launching the Commercial Paper Funding Facility, the Fed is trying to encourage investors to return to that market to ensure that eligible issuers can roll over maturing obligations. The central bank’s facility will purchase three-month debt from firms with high credit ratings. The Fed deployed a version of the tool between 2008 and 2010, during and after the financial crisis.

This sort of “Dark Web” financial bullsh%$ will destroy our economy, and when times are good they should be aggressively regulated so that they do not represent systemic risk.

Of course, this never happened, because when this all went pear-shaped in 2008 and 2009, the powers that be were dedicated to ensuring that there would be no meaningful reforms.

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