The Commercial Paper Funding Facility

Journal of Financial Crises: Vol. 2 : Iss. 3, 174-201. Available at:

Yale Program on Financial Stability Working Paper

28 Pages Posted: 26 Oct 2020

See all articles by Rosalind Wiggins

Rosalind Wiggins

Yale Program on Financial Stability

Date Written: October 10, 2020


In mid-September 2008, prime money market mutual funds (MMMFs) began experiencing run-like redemption requests sparked by one fund that had “broken the buck” because of large exposure to Lehman Brothers commercial paper (CP). As a result, MMMFs, which are significant investors in CP, became reluctant to hold CP. Within a week, outstanding CP had been reduced by roughly $300 billion. The CP market experienced severe shortening of maturities and increased rates, making it difficult for issuers to place new paper. When government efforts to assist the MMMFs did not resolve the stresses in the CP market, the Federal Reserve announced, on October 7, 2008, the Commercial Paper Funding Facility (CPFF), which sought to backstop the CP market and revive term lending.

The CPFF (through a special purpose vehicle) purchased highly rated US dollar–denominated three-month unsecured and asset-backed commercial paper (ABCP) from eligible US issuers. Purchases were funded with loans from the Federal Reserve Bank of New York (FRBNY). The CPFF was highly utilized in its first weeks, purchasing the overwhelming majority of new term CP; its usage then waned as market conditions improved. At its highest level, in January 2009, the CPFF held $350 billion—20% of all outstanding CP. The CPFF expired on February 1, 2010, with all loans paid in full. The program accumulated approximately $5 billion in earnings that was paid to the FRBNY. The program is credited with backstopping the market, providing a rollover option for maturing paper, and providing much needed year-end financing. Its role in helping to revive the term-lending market, however, has been debated, but there is evidence that it did help increase lending between CPFF participants and their relationships with nonfinancial corporate borrowers.

Keywords: short-term funding, commercial paper, asset-backed commercial paper (ABCP), mutual fund, money market mutual fund, liquidity facility, wholesale funding, Lehman Brothers, Reserve Primary Fund

JEL Classification: G01,G28

Suggested Citation

Wiggins, Rosalind, The Commercial Paper Funding Facility (October 10, 2020). Journal of Financial Crises: Vol. 2 : Iss. 3, 174-201. Available at:, Yale Program on Financial Stability Working Paper, Available at SSRN:

Rosalind Wiggins (Contact Author)

Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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