Now it’s a business lender of first resort
TEXT OF STORY
Bill Radke: And here’s another Fed move designed to get the economy going: The central bank will step in today to buy the promissory notes of top-rated companies. This is that move into commercial paper we’ve been telling you about. Here’s our senior business correspondent Bob Moon.
Bob Moon: Already, such corporate giants as General Electric and American Express are planning to take the Fed up on its offer.
Stephen Wesselkamper watches the short-term credit markets for Victory Capital Management. He says it’s desperately needed relief for cash-strapped businesses. They’ve had trouble finding buyers for this so-called “commercial paper” — short-term IOUs — to finance their day-to-day operations.
Stephen Wesselkamper: These issuers now have a buyer, and where maybe the Fed had been the lender of last resort, now they’re becoming the lender of first resort.
While investors are still giving this kind of debt an icy reception, Michael Holland of Holland & Company says there are already signs of a thaw.
Michael Holland: Simply the announcement of it has actually unclogged, to some extent, the system. And I think we’re going to see the fruits of those actions.
Many companies have had no choice but to borrow against lines of credit issued by banks — generally much more expensive.
In Los Angeles, I’m Bob Moon for Marketplace.
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