Explanation
The CPFF began operations on October 27, 2008 following the collapse of Lehman Brothers and government bailout of AIG and the global credit freeze that ensued. The CPFF method of short-term funding provided liquidity to U.S. issuers of commercial paper through a special purpose vehicle, aka SPV, which bought unsecured and asset-backed commercial paper for 3 month period from eligible issuers with funds made available by the NY Fed. The commercial paper remained in the custody of the SPV till the CP matured. On maturity, the proceeds from commercial paper and other assets were used to repay the loan that was originally taken from the NY Fed. All purchases of the Commercial Papers by the SPV was done through the New York Fed’s primary dealers. This program lent out a total $738 billion before it was closed. 45 out 81 of the companies participating in this program were foreign firms. Research shows that Troubled Asset Relief Program (TARP) recipients were twice as likely to participate in the program than other commercial paper issuers who did not take advantage of the TARP bailout. The Fed incurred no losses from the CPFF.
This program was created at the same time that the Federal Deposit Insurance Corporation implemented the Temporary Liquidity Guarantee Program to increase liquidity in inter-bank lending.
Read more about this topic: Commercial Paper Funding Facility
Famous quotes containing the word explanation:
“Young children constantly invent new explanations to account for complex processes. And since their inventions change from week to week, furnishing the “correct” explanation is not quite so important as conveying a willingness to discuss the subject. Become an “askable parent.””
—Ruth Formanek (20th century)
“We live between two worlds; we soar in the atmosphere; we creep upon the soil; we have the aspirations of creators and the propensities of quadrupeds. There can be but one explanation of this fact. We are passing from the animal into a higher form, and the drama of this planet is in its second act.”
—W. Winwood Reade (1838–1875)
“Are cans constitutionally iffy? Whenever, that is, we say that we can do something, or could do something, or could have done something, is there an if in the offing—suppressed, it may be, but due nevertheless to appear when we set out our sentence in full or when we give an explanation of its meaning?”
—J.L. (John Langshaw)