WORLD> America
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WORLD> America
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Fed to buy massive amounts of short-term debt
(Agencies)
Updated: 2008-10-07 23:39 WASHINGTON - The Federal Reserve announced Tuesday a radical plan to buy massive amounts of short-term debts in a dramatic effort to break through a credit clog that is imperiling the economy.
The Federal Reserve, invoking Depression-era power under "unusual and exigent circumstances," will buy "commercial paper," a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls. That has made it increasingly difficult and expensive for companies to raise money to fund their operations. Commercial paper is a way of borrowing money for short periods, typically ranging from overnight to less than a week. The unstable situation has left many companies vulnerable. The notion under the plan is for the government to provide a "backstop" that would give companies a new place to get cash, the Fed said. The action makes the Fed a source of credit for nonfinancial businesses in addition to commercial banks and investment firms. The Fed's action helped lift investors' spirits. The Dow Jones industrials rose 145 points in early trading, a day after a huge selloff put the Dow below 10,000 for the first time in four years. |
