MONDAY NOVEMBER 17
You’ve Got To Be Kidding Us...
Only the Federal Reserve could possibly come up with a program (in this case, one that backs not only banks, but also the $1 trillion asset-backed commercial paper market) boasting an acronym like ABCPMMMFLF. Just a tip, fellas: acronyms were invented to make references easier – not entirely inconceivable. Now, for how deep-pocketed players like JPMorgan, Deutsche Bank and BNP Paribas are finding ways to take advantage.
November 2008
The U.S. Federal Reserve's emergency lending programs, intended to thaw commercial paper and money markets, are also helping banks limit losses from some of their $4 trillion in off-the-books guarantees and loan commitments.
A Fed program to buy as much as $1.8 trillion of short-term debt from U.S. companies means they don't have to tap backup credit lines provided by banks, which would have forced JPMorgan Chase & Co., Citigroup Inc. and other financial institutions to record the loans on their balance sheets and raise more capital. Another Fed program, with the acronym ABCPMMMFLF, aims to shore up the $1 trillion market for asset-backed commercial paper issued by off-the-books financing vehicles guaranteed by banks.
``The Fed's commercial paper programs avoided a mid-air collision,'' said Josh Rosner, managing director of New York- based research firm Graham Fisher & Co. Having to deliver on the loan commitments ``would have caused a liquidity crunch'' for the banks that made them, he said.
The three-week-old program for commercial paper, or debt maturing in nine months or less, had $257 billion of loans outstanding as of Nov. 13, the Fed reported.
Ford Motor Co.'s financing unit, which uses a $16 billion commercial paper program to fund auto loans, sold about $4 billion of that to the Fed, according to a Nov. 7 regulatory filing. Doing so minimized draws from the $16 billion of bank credit lines backing up the commercial paper, the filing said.
The credit lines are provided by 42 banks, including JPMorgan ($3 billion), BNP Paribas SA ($1.1 billion) and Deutsche Bank AG ($924 million), according to Ford Credit Auto Owner Trust, manager of the program for the Dearborn, Michigan-based company.
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