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The Federal Reserve's Commercial Paper Funding Facility

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Author Info

  • Tobias Adrian
  • Karin Kimbrough
  • Dina Marchioni

Abstract

The Federal Reserve created the Commercial Paper Funding Facility (CPFF) in the midst of severe disruptions in money markets following the bankruptcy of Lehman Brothers on September 15, 2008. The CPFF finances the purchase of highly rated unsecured and asset-backed commercial paper from eligible issuers via primary dealers. The facility is a liquidity backstop to U.S. issuers of commercial paper, and its creation was part of a range of policy actions undertaken by the Federal Reserve to provide liquidity to the financial system. This paper documents aspects of the financial crisis relevant to the creation of the CPFF, reviews the operation of the CPFF, discusses use of the facility, and draws conclusions for lender-of-last-resort facilities in a market-based financial system.

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Bibliographic Info

Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 423.

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Date of creation: 2010
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Handle: RePEc:fip:fednsr:423

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Related research

Keywords: Federal Reserve System ; Commercial paper ; Financial crises ; Liquidity (Economics) ; Federal Reserve Bank of New York;

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References

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  1. Todd Keister & James J. McAndrews, 2009. "Why are banks holding so many excess reserves?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Dec.
  2. Bengt Holmstrom & Jean Tirole, 1998. "Private and Public Supply of Liquidity," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 1-40, February.
  3. Zoltan Pozsar & Tobias Adrian & Adam Ashcraft & Hayley Boesky, 2010. "Shadow banking," Staff Reports 458, Federal Reserve Bank of New York.
  4. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June.
  5. Acharya, Viral V. & Gale, Douglas M & Yorulmazer, Tanju, 2009. "Rollover Risk and Market Freezes," CEPR Discussion Papers 7122, C.E.P.R. Discussion Papers.
  6. Tobias Adrian & Christopher R. Burke & James J. McAndrews, 2009. "The Federal Reserve's Primary Dealer Credit Facility," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Aug.
  7. Michael J. Fleming & Warren B. Hrung & Frank M. Keane, 2009. "The Term Securities Lending Facility: origin, design, and effects," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Feb.
  8. Michael J. Fleming & Nicholas J. Klagge, 2011. "Income effects of Federal Reserve liquidity facilities," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Feb.
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Citations

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Cited by:
  1. Michael Woodford & Vasco Curdia, 2010. "The Central Bank's Balance Sheet as an Instrument of Monetary Policy," 2010 Meeting Papers 136, Society for Economic Dynamics.
  2. Benjamin M. Friedman & Kenneth N. Kuttner, 2010. "Implementation of Monetary Policy: How Do Central Banks Set Interest Rates?," NBER Working Papers 16165, National Bureau of Economic Research, Inc.
  3. Michael Woodford, 2011. "Comment on "Two Monetary Tools: Interest Rates and Haircuts"," NBER Chapters, in: NBER Macroeconomics Annual 2010, Volume 25, pages 193-204 National Bureau of Economic Research, Inc.
  4. Nada Mora, 2010. "Can banks provide liquidity in a financial crisis?," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 31-67.
  5. Scott Brave & Hesna Genay, 2011. "Federal Reserve policies and financial market conditions during the crisis," Working Paper Series WP-2011-04, Federal Reserve Bank of Chicago.
  6. Tobias Adrian & Daniel Covitz & Nellie J. Liang, 2013. "Financial stability monitoring," Staff Reports 601, Federal Reserve Bank of New York.
  7. Tobias Adrian & Adam B. Ashcraft, 2012. "Shadow banking: a review of the literature," Staff Reports 580, Federal Reserve Bank of New York.
  8. Zoltan Pozsar & Tobias Adrian & Adam Ashcraft & Hayley Boesky, 2010. "Shadow banking," Staff Reports 458, Federal Reserve Bank of New York.
  9. James D. Hamilton & Jing Cynthia Wu, 2012. "The Effectiveness of Alternative Monetary Policy Tools in a Zero Lower Bound Environment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 3-46, 02.
  10. Tobias Adrian & Daniel Covitz & Nellie Liang, 2013. "Financial stability monitoring," Finance and Economics Discussion Series 2013-21, Board of Governors of the Federal Reserve System (U.S.).
  11. Arvind Krishnamurthy & Stefan Nagel & Dmitry Orlov, 2012. "Sizing Up Repo," NBER Working Papers 17768, National Bureau of Economic Research, Inc.
  12. Silvio Contessi & Pierangelo De Pace & Massimo Guidolin, 2013. "How did the financial crisis alter the correlations of U.S. yield spreads?," Working Papers 2013-005, Federal Reserve Bank of St. Louis.
  13. Warren B. Hrung & Jason S. Seligman, 2011. "Responses to the financial crisis, treasury debt, and the impact on short-term money markets," Staff Reports 481, Federal Reserve Bank of New York.

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