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10/07/2008
--- Bold Move By Fed To Offer Short-Term Loans To Businesses
Today the Fed announced
an unusual plan to free up the credit markets. Non-financial
businesses can now get short-term financing (via "commercial
paper") from the Federal Reserve. Commercial paper
is a way of borrowing money for short time periods, as short
as overnight but often as long as three months. This will
help businesses to finance their day-to-day operations.
It also gives these businesses an additional source of loans
other than financial institutions and investors Both groups
have recently been hesitant to buy commercial paper.
"This should encourage
investors to once again engage in short term lending in
the commercial paper market," the Fed said. "That
should eventually spur financial companies to lend to each
other and to their customers, including consumers."
This should help speed up
the government's effort to get the credit markets flowing
again.
