The Federal Reserve is attempting to head off a depression by providing $1.2 trillion in money to banks from August 2007 through April 2010.
The bankruptcy of Lehman Brothers Holdings Inc. in September 2008 triggered losses at the world's oldest money market mutual fund.
About Oct. 1, 2008, the feds had $152.1 billion of loans outstanding.
Three weeks after Lehman Brothers collapsed, companies financed themselves by selling commercial paper bonds with a maturity of 270 days or less. For the simple reason that these are considered the safest, because of their relatively short terms. The problem is these bonds were frozen out of the market. The Fed unveiled the Commercial Paper Funding Facility, or CPFF, on Oct. 7, 2008, to "help provide liquidity to term funding markets." DUH!
When the program began, banks including Citigroup Inc., Bank of America Corp. and Switzerland's UBS AG participated.
Because non-banks usually are not eligible to borrow from the Fed, central-bank officials had to invoke Section 13(3) of the Federal Reserve law, which allows such loans "in unusual and exigent circumstances."
By January 2009, the Fed had bought $348 billion of commercial paper.
The Federal Reserve was created in 1913 after finical panics in the late 1800's. The main idea of the newly formed Federal Reserve was to head off crises ( uncontrollable inflation or depression) through the use of a discount window. A lending program that could supply institutions ( Banks and other entities) with cash if customers rushed to withdraw more money than banks had on hand.
Buy Land and Gold
have a great day,
Ray
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