The Fed Steps Into The Commercial Paper Market

The Fed announced this morning, October 7, 2008, that they will enter the commercial paper market:

"... Fed will purchase three-month unsecured and asset-backed commercial paper directly from eligible issuers"

The Fed hopes this latest round of measures will help to liquidate the frozen business credit markets as many small businesses are increasingly feeling the pain of not being able to obtain business credit.


The short-term effects of the myriad of measures taken by the Fed over the past six months will undoubtedly begin to filter into the market over the next year. What will the long-term effects of pumping this unbelievable amounts of liquidity into the market?