The Commercial Paper Funding Facility

Posted: 17 Mar 2009

See all articles by Tobias Adrian

Tobias Adrian

International Monetary Fund

Karin J. Kimbrough

Federal Reserve Bank of New York

Dina Marchioni

Federal Reserve Banks - Federal Reserve Bank of New York

Date Written: January 1, 2009

Abstract

The commercial paper market experienced considerable strain in the weeks following the bankruptcy of Lehman Brothers on September 15, 2008, leading to liquidity pressures as investors such as money market mutual funds became increasingly reluctant to purchase commercial paper. As a result, the percentage of outstanding commercial paper that had to be refinanced each day rose rapidly during the Fall of 2008, interest rates on longer-term commercial paper increased significantly, and the volume of outstanding commercial paper declined sharply. A large share of outstanding commercial paper is issued or sponsored by financial intermediaries, and their difficulties placing commercial paper reduced their ability to meet the credit needs of businesses and households. The Commercial Paper Funding Facility (CPFF) provides a liquidity backstop to U.S. issuers of commercial paper through a special purpose vehicle (SPV) that purchases eligible three-month unsecured and asset-backed commercial paper from eligible issuers using financing provided by the Federal Reserve Bank of New York. The SPV holds the commercial paper until maturity and uses the proceeds from maturing commercial paper and other assets of the SPV to repay its loan from the New York Fed. The paper discusses design issues, as well as measures of evaluation of the facility.

Keywords: Monetary policy, liquidity backstop, money markets

JEL Classification: G01, G18, E5

Suggested Citation

Adrian, Tobias and Kimbrough, Karin J. and Marchioni, Dina, The Commercial Paper Funding Facility (January 1, 2009). Available at SSRN: https://ssrn.com/abstract=1361163 or http://dx.doi.org/10.2139/ssrn.1361163

Tobias Adrian (Contact Author)

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://www.tobiasadrian.com

Karin J. Kimbrough

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Dina Marchioni

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,832
PlumX Metrics