Fed creates commercial paper-buying facility – Commercial Paper Funding Facility (CPFF)

October 7, 2008 by · Leave a Comment
Filed under: Economic News 

Well you can’t say that I did not state this would happen after the precedent that was set first with investment banks, insurance companies, commercial banks and auto companies.  California is up and I would figure Alabama might not be far behind.  I will say that this move is one that I can live with because it keeps people employed by providing the short-term funding.  The real risk I see is if our economy gets worse as predicted and these companies can’t not pay back the Federal Reserve and then this goes from a somewhat inflation neutral operation to a inflationary operation because much of this money is going to payroll and inventory expenses and that money will be deployed and as we know, the more our economy sinks then people will panic and the “velocity of money” will increase and that will really make prices on essential goods start to take off.

Release:

The Federal Reserve on Tuesday announced it would create a special-purpose facility, with the Treasury Department’s blessing, to begin buying commercial paper in yet another emergency move aimed at calming chaotic financial markets.  The central bank said it was acting because money market mutual funds and other investors have become increasingly reluctant to buy commercial paper, which is widely issued to provide vital funds for day-to-day business operations at many companies.

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Overnight Commercial Paper Rates Rise as Bank Bailouts Spread

October 6, 2008 by · Leave a Comment
Filed under: Global News 

Everyone has this “whatever it takes attitude” and this is going to be the mess they leave us with. No one is talking about what happens when the economy contracts and we are left with all this excess liquidity? My bet is on massive inflation that has never been seen in this country. We are witnessing global debasement of currency that are trying to keep up with us which is futile because people feel more comfortable with our currency over other foreign currencies at this point.

At a point we should see a change in that attitude and then I would say instead of having a single reserve currency, we will see a basket along with some measure being put into place that ties the currency to gold in some way to serve as an indicator to show if there is a major expansion in any countries monetary base. .02

News Piece:

Corporate short-term borrowing rates soared as bank bailouts spread through Europe and the Federal Reserve said it would double its auctions of cash to banks to thaw short-term lending.

Yields on overnight U.S. commercial paper jumped 0.94 percentage point to 3.68 percent, according to data compiled by Bloomberg that stretch back to January 1996. That’s the most since the eight-month high of 3.95 percent set Sept. 30 after the U.S. House of Representatives rejected a plan to rescue banks; the bailout eventually was signed into law last week.

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Washington Mutual says its operations are not dependant on commercial paper

July 24, 2008 by · Leave a Comment
Filed under: Industry News 

Bloomberg reported that the largest U.S. savings and loan bank based out of Seattle, Washington is not reliant on commercial paper to fund its banking operation. After the record losses they have posted in recent quarters and the failure of the California bank of IndyMac, much criticism has been given to WaMu the last couple of weeks. This has fueled much speculation that the Seattle bank would be next to have a crisis in the coming weeks.

Even in my reading of other discussions about the U.S. banking industry in general, many pundits and analysts have also mention that they feel WaMu is “not too big to fail” and could meet the same fate as IndyMac or other regional banks. They do on the other hand have a strong deposit base so in was a good move to make this statement to reduce the amount of speculation.

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