Commercial Paper Funding Facility - CPFF and Funding Program
Categories: Banking, Accounting, Trading
No, it's not a loan for buying toilet paper in bulk.
The Commercial Paper Funding Facility actually helped save the world's financial system once upon a time (not that buying toilet paper in bulk isn't helpful as well).
Commercial paper is a type of short-term loan. Companies issue these notes to bring in the funds they need to keep their operations humming, and to smooth out bumps in the business cycle. It's like getting a line of credit, only from a group of investors rather than from a bank.
During the financial crisis of 2007-2008, the market for commercial paper...froze. This situation put a lot of companies in danger of a cash crunch and left a number of investors holding paper they couldn't sell.
In response, the Federal Reserve set up the Commercial Paper Funding Facility. The measure provided liquidity for the market, with the Fed financing the purchase of certain low-risk commercial paper. The CPFF lasted for less than a year-and-a-half, starting in late October of 2008 and closing down in early 2010.
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