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Does Receiving TARP Funds Make it Easier to Roll Your Commercial Paper Onto the Fed?

32 Pages Posted: 17 Aug 2011 Last revised: 24 Aug 2011

Linus Wilson

University of Louisiana at Lafayette - College of Business Administration

Yan Wendy Wu

Wilfrid Laurier University

Date Written: August 22, 2011

Abstract

The Commercial Paper Funding Facility (CPFF) bought commercial paper from highly-rated issuers of U.S. dollar commercial paper during the financial crisis of 2008 to 2009. This is the only study to analyze the characteristics of firms selected for this Federal Reserve program. CPFF participants and non-participants differed little in terms of profitability, solvency, or liquidity ratios. Nevertheless, CPFF participants were significantly more likely to come from the financial sector, to pose greater systemic risks, and to have received funds from the Troubled Asset Relief Program (TARP) bailout. The baseline predicted probability of participation in the CPFF jumps from 37.2 percent to 65.9 percent if the commercial paper issuer participated in the TARP bailout.

Keywords: ABCP, Asset Backed Commercial Paper, bailout, banks, Capital Purchase Program (CPP), commercial paper, Commercial Paper Funding Facility (CPFF), emergency lending, Federal Reserve, multinational firms, section 13(3), Troubled Asset Relief Program (TARP), U.S. Treasury, unsecured commercial paper

JEL Classification: G01, G18, G2, G28

Suggested Citation

Wilson, Linus and Wu, Yan Wendy, Does Receiving TARP Funds Make it Easier to Roll Your Commercial Paper Onto the Fed? (August 22, 2011). Available at SSRN: https://ssrn.com/abstract=1911454 or http://dx.doi.org/10.2139/ssrn.1911454

Linus Wilson (Contact Author)

University of Louisiana at Lafayette - College of Business Administration ( email )

Department of Economics & Finance
214 Hebrard Blvd., Room 326
Lafayette, LA 70504-0200
United States
(337) 482-6209 (Phone)
(337) 482-6675 (Fax)

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

Yan Wendy Wu

Wilfrid Laurier University ( email )

75 University Ave W
Waterloo, Ontario N2L 3C5
Canada

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