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Comment: The CPFF is the first of the crisis era lending facilities to make a reappearance

On Tuesday, March 17, the Federal Reserve announced “establishment of a Commercial Paper Funding Facility (CPFF) to support the flow of credit to households and businesses.” The CPFF is a revival of a lending facility made use of during the financial crisis. The return of the CPFF is intended to ease strains in the commercial paper market. The announcement said, “The Treasury will provide $10 billion of credit protection to the Federal Reserve in connection with the CPFF from the Treasury’s Exchange Stabilization Fund (ESF). The Federal Reserve will then provide financing to the SPV under the CPFF. Its loans will be secured by all of the assets of the SPV.”

The original CPFF:

June 25, 2009 – The CPFF was extended through February 1, 2010, although “usage of the CPFF is declining fairly steadily” as interest rates became less attractive.

February 3, 2009 – The Fed extended existing liquidity programs through October 30, 2009, including the CPFF, as well as existing swap lines with numerous central banks.

October 14, 2008 – The Fed announced additional details regarding the CPFF, including that it would begin funding purchases of commercial paper on October 27, 2008.

October 7, 2008 – The Commercial Paper Funding Facility (CPFF) to provide liquidity to term funding markets was created.

For a fuller history of lending facilities used during the financial crisis, see the Whetstone Analysis Reference Library‘s “Federal Reserve Balance Sheet Developments”.

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