tailieunhanh - The Federal Reserve’s Commercial Paper Funding Facility

Irish IFs are owned mainly by non-residents, with 26 per cent held by other euro area residents and 68 per cent held by those outside the euro area and just 6 per cent owned by Irish residents. This breakdown reflects a significant move in ownership away from euro area residents to the rest of the world over recent quarters. Similarly most assets owned by Irish resident IFs are domiciled outside the state. When unclassified assets are excluded, just per cent of capital is invested in Irish assets, per cent invested. | Tobias Adrian Karin Kimbrough and Dina Marchioni The Federal Reserve s Commercial Paper Funding Facility 1. Introduction The commercial paper market experienced considerable strain in the weeks following Lehman Brothers bankruptcy on September 15 2008. The Reserve Primary Fund a prime money market mutual fund with 785 million in exposure to Lehman Brothers broke the buck on September 16 triggering an unprecedented flight to quality from high-yielding to Treasury-only money market funds. These broad investor flows within the money market sector severely disrupted the ability of commercial paper issuers to roll over their short-term liabilities. As redemption demands accelerated particularly in high-yielding money market mutual funds investors became increasingly reluctant to purchase commercial paper especially for longer dated maturities. As a result an increasingly high percentage of outstanding paper had to be refinanced each day interest rates on longer term commercial paper increased significantly and the volume of outstanding paper declined sharply. These market disruptions had the potential to constrain the economic activities of commercial paper issuers. Indeed a large share of outstanding commercial paper is issued or sponsored by financial intermediaries and the difficulties they faced placing commercial paper further reduced their ability to meet the credit needs of businesses and households. In light of these strains the Federal Reserve announced the creation of the Commercial Paper Funding Facility CPFF on October 7 2008 with the aim of supporting the orderly functioning of the commercial paper market. Registration for the CPFF began October 20 2008 and the facility became operational on October 27. The CPFF operated as a lender-of-last-resort facility for the commercial paper market. It effectively extended access to the Federal Reserve s discount window to issuers of commercial paper even if these issuers were not chartered as commercial banks. Unlike