| Submit your comments on this article |
| Home Front Economy |
| Fed eyes plan to fund short-term business loans |
| 2008-10-07 |
| The government is weighing a bold plan to buy massive amounts of unsecured short-term debts in a dramatic effort to break through a credit clog that is imperiling the economy. The Federal Reserve is working with the Treasury Department on the plan to buy "commercial paper," a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls, according to a person with knowledge of the plan. The person spoke on condition of anonymity because the plan is still being put together. The market for this crucial financing, which relies on investors rather than banks, has virtually dried up. That has made it increasingly difficult and expensive for companies to raise money to fund their operations. Commercial paper is a way of borrowing money for short periods, typically ranging from overnight to less than a week. The unstable situation has left many companies vulnerable. The notion under the plan is for the government to come up with a backstop that would provide companies with a new place to get cash. Depending on the ultimate shape of the plan, the Fed could become a source of credit for nonfinancial businesses in addition to commercial banks and investment firms. The Fed made an opaque reference on Monday that it was exploring "ways to provide additional support" to "unsecured funding markets." The creation of a separate legal entity was being examined as one way for the Fed to get into the commercial paper market, the person with familiar with the plan said. |
| Posted by:ed |
| #7 Ya know, hangin' was a great deterrent to bank robbers in the 1800's. Since then, we've decided it's too "cruel and unusual", and crime is rampant. Maybe if we re-introduced hangin' for serious crimes, it might send the same message it did before. The biggest criminals I know all seem to be in Congress... |
| Posted by: Old Patriot 2008-10-07 19:03 |
| #6 |
| Posted by: BigEd 2008-10-07 13:04 |
| #5 More small business loans for minorities and the "economically repressed" no doubt. People who are just as unqualified to own a business as they were to buy a house. Why do I see this ending just as badly as the housing debacle? If they vet the companies well enough it would be a fantastic move, small business accounts for a lot more jobs and tax $$ than big business could ever dream of. But I see a pattern with anything the govt. touches, and it doesn't turn to gold. |
| Posted by: bigjim-ky 2008-10-07 11:30 |
| #4 Really? I didn't know that. |
| Posted by: Nimble Spemble 2008-10-07 09:52 |
| #3 News Alert NS - they're already leading other peoples money, i.e. bailout to the tune of soon to be a trillion dollar figure. We're all on the bottom line for that. |
| Posted by: Procopius2k 2008-10-07 09:23 |
| #2 Yeah. And the feds should take over FedEx too. After all it has Fed in the name already. You should spend time in commercial and governmental lending units before you so quickly endorse having the government decide how to lend other peoples money. |
| Posted by: Nimble Spemble 2008-10-07 09:10 |
| #1 The market for this crucial financing, which relies on investors rather than banks, has virtually dried up. That has made it increasingly difficult and expensive for companies to raise money to fund their operations. Commercial paper is a way of borrowing money for short periods, typically ranging from overnight to less than a week. Beating a dead horse. This is what a Bank of the United States could and would do. Banks would be forced to compete or forfeit that market. Depending on the ultimate shape of the plan, the Fed could become a source of credit for nonfinancial businesses in addition to commercial banks and investment firms. Gee, if it walks like a duck, swims like a duck... Instead of infusing $700B into the hands of middlemen, why not just do it yourself? |
| Posted by: Procopius2k 2008-10-07 09:07 |