Robust it isn’t, but there are signs that the international push to unclog the credit market is working. The Federal Reserve’s Commercial Paper Funding Facility, a.k.a. the CPFF, took off smoothly last week. The CPFF aims to restore the commercial paper market to levels seen between January 1 and August 31 of this year. The Fed buys three-month commercial paper with an A1/P1 rating from issuers; volumes are limited to the companies’ activity in the private commercial paper market during the January-August 2008 period. The private CP market is crucial to many companies for day-to-day operating expenses, and it has been essentially locked down since the middle of September.

Response to the Fed’s initiative has been strong. GMAC, Ford Credit, American Express, Harley Davidson, and many others jumped right in. Although the Fed won’t disclose the names of participants the or amounts of CP involved, Citibank Global Markets estimates that “nearly a hundred billion dollars of CP has been issued directly to the Federal Reserve in this program’s first few days of existence.”

The CPFF is “intended to be the lender of last resort,” notes Patricia Lane, a partner in law firm Foley & Lardner’s financial crisis response team. “The application form is very easy to fill out, and many participants have done so on their own. The terms are clear, and the program is working.” In theory, at least, the limits on CP issues “are easy to avoid—all you have to do is sell your paper to the Fed, then go into the private market. It’s just a matter of timing.” Of course nothing is really happening yet in the private CP market. That’s why the Fed stepped in as lender of last resort in the first place.

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