I.O.U.

Three little letters. But so important.

As we’ve been talking about a lot on the program, the credit markets are still unvelievably tight, even after the bailout bill, especially the short-term credit markets.

A lot of the day-to-day grease that businesses use to keep the economy going depends on something called commercial paper — basically, short-term I.O.U.’s they issue (often to one another) to get overnight cash.

Some of that paper is secured — backed by tangible assets — so lenders can have some faith they’ll get repaid one way or another.

Some of it isn’t, which is why I’m talking about this so early in the morning.

The Fed is talking about buying up some of that unsecured paper.

That is, investing directly in businesses.

That’s a big deal.

More later on Marketplace this afternoon.