Remember back in Bernankeism and hyper-inflation, we talked about Ben Bernanke and companys’ unconventional (and crazy) schemes for attempting to induce inflation in a deflationary economy. One of the listed crazy ideas was:
Loan money into existence, accepting as collateral almost any private-sector asset whatever.
Today, we found this news report: Fed announces bailout of business lending.
Congratulations, Ben Bernanke!
In this news report, the Fed fears that…
… companies not facing financial problems are at risk of default on their commercial paper if they are not able secure another round of funding when their current borrowing matures.
Therefore, it announced a program to almost lend directly to businesses, by establishing a Special-Purpose-Vehicle to buy commercial paper from issuers (i.e. borrowers that include corporations). The announcement from the Fed can be found here. The loan security arrangement for non-asset-backed commercial paper (non-ABCP) are listed in the terms and conditions document in the Fed’s announcement.
This means the Fed is bypassing the banking system in order to make loans directly to the private sector.
Tags: Ben Bernanke, commercial paper, credit, Federal Reserve
