In massive amounts. See also Bloomberg:
The Federal Reserve will create a special fund to purchase U.S. commercial paper after the credit crunch threatened to cut off a key source of funding for corporations.
The Treasury will make a deposit with the Fed's New York district bank to help set up the special purpose vehicle. The central bank will also lend to the program at policy makers' target rate for overnight loans between banks [LIBOR?]. The Fed Board invoked [FDR-era, ha!] emergency powers to set up the unit, the central bank said in a statement released in Washington.
Today's action follows a slide in the commercial-paper market to a three-year low of $1.6 trillion last week as investors fled even companies with few links to the subprime mortgage crisis. Companies from newspaper firm Gannett Co. to electricity producer Southern Co. have been forced to tap credit lines or forego raising debt because of the market's disruption.
The Fed didn't say how much commercial paper, which hundreds of companies use to finance payrolls and meet other cash needs, it plans to purchase.
Actually, after listening to Ira Glass, which you should to, too, the Fed's action makes more sense to me than the bailout -- at least we're not buying toxic derivatives.
Though I still can't help but wonder if manipulation is at work.
NOTE Meanwhile, a fine piece of snark from The Shrill
One. You know, I used to like Krugman when he wrote about politics, but since he started writing about economic, I've started to lose respect for him [rimshot. laughter].
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Now I get it.
The subprime primer explains all.
Ends appropriately, too.
No, commercial paper is not subprime
although the assholes who created the toxic derivates did take down the market for commerical paper. Again, listen to this.
That is a funny slide show, though!
[ ] Very tepidly voting for Obama [ ] ?????. [ ] Any mullah-sucking billionaire-teabagging torture-loving pus-encrusted spawn of Cthulhu, bless his (R) heart.
First they ignore you, then they ridicule you, then they fight you, then you win. -- Mahatma Gandhi
HOLC
I would rather buy mortgages, but commercial paper is an improvement.
Pointless...
the problem is not a lack of short-term capital, the problem is a lack of short-term capital at reasonal interest rates. And given that the debt that the Fed will be buying back is actually borrowed by the banks from the Fed itself (the banks take out short term loans from the fed to provide short-term loans to businesses), all the Fed is doing is eliminating the middle-man (the banks) in a way that provides ZERO additional capital to businesses that need short-term loans to meet their payroll, pay their suppliers, etc.
It makes far more sense for the Fed to make these loans directly to businesses --- first off, they will be able to get a better interest rate, and secondly, the banks will realize that they are losing business and start competing with the Fed.
I know, lambert.
It was OT for this thread, but it is a pretty funny and prolly fairly accurate explanation of the subprime mess. One step at a time for us economic dummies. :)
"$1.3 trillion worth of commercial paper would qualify."
http://www.nytimes.com/aponline/business...
"... Fed officials said they'll buy as much of the debt as necessary to get the market functioning again. They refused to say how much that might be, but they noted that around $1.3 trillion worth of commercial paper would qualify.. ..."