Fed May Start To Buy Commercial Paper At Subsidized Rates

The Federal Reserve may be willing to purchase companies short term commercial paper at rates that are lower and henceforth, more attractive to the company.  Typically, money market mutual funds, demand a rate of return on their cash.  The Federal Government is willing to do it for less according to Bloomberg.

Oct. 15 (Bloomberg) — The Federal Reserve may subsidize U.S. companies by buying their short-term debt at rates below those demanded by private investors in the $1.6 trillion commercial-paper market.  Fed officials yesterday set the yield they will pay for commercial paper at about 1.1 percentage points less than the average cost for financial companies, weekly central bank data show. Policy makers last week announced emergency plans to buy the securities after the market shrank to a three-year low.

I’m really starting to feel like this crisis is completely out of control.  The stock markets are gyrating wildly - shifting by 700 to 1000 points intraday.  There is a lot of trading going on in the equity index futures overnight.  The international markets are just as crazy.  The Feds have tried to do everything that they could do to stabilize the markets.

Everyday, it seems that there’s a “new solution”, a “new proposal” that’s going to fix the markets.  It really feels as though we may be ready to go over the falls!  If we break Friday lows, then there’s a good chance that we could easily crash and retest the 7500 lows on the S&P 500 (^GSPC).

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