Fed Restarts Commercial Paper Facility

Bloomberg reports Fed Restarts Commercial Paper Facility to Ease Market Strain

The central bank is using emergency authorities to establish the Commercial Paper Funding Facility with the approval of the Treasury secretary, according to a Fed statement on Tuesday. The Treasury will provide $10 billion of credit protection from its Exchange Stabilization Fund.

The move follows mounting pressure to act after the Fed's Sunday evening emergency interest-rate cut to nearly zero and other measures failed to stem market strains as investors reacted to the risk that the virus will tip the U.S. and global economy into a potentially damaging recession.

"By providing short-term credit, the CPFF will help American businesses manage their finances through this challenging period," Treasury Secretary Steven Mnuchin said in a separate statement.

The Fed said it will provide financing to a special-purpose vehicle that will purchase A1/P1 rated commercial paper from eligible companies, and purchases will last for one year unless the Fed extends the program.