New York Fed Takes Step To Bolster Credit Market

New York Fed Takes Step To Bolster Credit Market
By Greg Ip
Word Count: 696

In another step aimed at unfreezing the commercial paper market, the Federal Reserve Bank of New York clarified its discount window rules with the effect of enabling banks to pledge a broader range of commercial paper as collateral.

Under the clarification, issued verbally by New York Fed officials to market participants in the last day, banks may pledge asset-backed commercial paper for which they also provide the backup lines of credit.

"This strikes us as a very big deal," said Lou Crandall, chief economist at Wrightson-ICAP LLC. Traditionally, he said, banks did not pledge paper that they guaranteed because this ...
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