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The Fed’s new front in the financial crisis

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  • Tatom, John

Abstract

The continuing foreclosure crisis worsened in October 2008. The Federal Reserve (Fed) continued the aggressive expansion of new private credit that it began in mid-September and it created three new credit facilities to add to the plethora of other facilities created since the financial crisis component of the foreclosure crisis began in August 2007. These new facilities are aimed at stabilizing the commercial paper (CP) market, most recently adversely affected by the failure of Lehman Brothers and the failures of several money market mutual funds (MMMF). From mid-September to the end of October, the Fed more than doubled its total assets, largely by expanding its private sector lending. Perhaps the most significant question to emerge over the past two months is whether the Fed has an exit strategy to pull all of this new financial asset creation out after it succeeds in stemming deflation and before it kick starts the economy into a major inflation problem.

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File URL: http://mpra.ub.uni-muenchen.de/11803/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11803.

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Date of creation: 31 Oct 2008
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Publication status: Published in Research Buzz 8.4(2008): pp. 1-6
Handle: RePEc:pra:mprapa:11803

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Keywords: commercial paper; monetary policy; financial crisis;

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  1. Tatom, John, 2008. "The continuing foreclosure crisis: new institutions and risks," MPRA Paper 12502, University Library of Munich, Germany.
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