Fed relying on ratings agencies?
Posted by WARREN MOSLER on October 24th, 2008
Ironically (?) after reading all the criticism of private sector lenders relying on ratings agencies rather than internal analysis I see this:
GE to use Fed’s commercial paper facility next week
By Rachel Layne and Scott Lanman
The Fed is setting up the special fund to buy commercial paper, and will start the program on Oct. 27. The U.S. Treasury will make a $50 billion deposit into the fund as an indication of support. The Fed said the maximum amount of commercial paper that could be funded by the facility is about $1.8 trillion.
The central bank will buy only debt with the top short-term ratings of A-1, F1 and P-1 given by Standard & Poor’s, Fitch Ratings and Moody’s Investors Service respectively. The facility provides for 90-day borrowing which may help lengthen the time periods for which liquidity is available.
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