Fed to Buy up to $1.3 Trillion of Commercial Paper

The Federal Reserve announced Tuesday it will buy up to $1.3 trillion of the top-rated asset-backed and unsecured commercial paper in the markets-virtually a business loan bailout due to frozen money markets, the closest the government has come to making loans to businesses directly. It is an extraordinary move, as the commercial paper market, once considered very safe and liquid, had averaged $2 trillion but fell to $1.82 trillion on Sept. 10 and $1.6 trillion on Oct. 1. Issuers of commercial paper that is not asset-backed will be required to pay up-front fees.

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