Re: [Pen-l] Fed to start buying commercial paper

[dsquared@xxxxxxxxxxxxxxxx]

NB that this is a much less recherche and unusual tactic than it's being portrayed as - commercial paper is the modern equivalent of "bills of exchange", and the discounting of bills of exchange was a fairly standard activity of the Walter Bagehot-era Bank of England.  In fact, up until very recently (ie, it changed while I worked there in the 1990s), the BoE used to carry out its monetary policy operations by intervening in the commercial paper market, and the question of what to do with the resulting massive CP portfolio (the "bill mountain") was the subject of regular chin-stroking sessions.  Monetary operations through government bond repo are a pretty new development.

best
dd

> ----- Original Message -----
> From: "Doug Henwood" <dhenwood@xxxxxxxxx>
> To: "Progressive Economics" <pen-l@xxxxxxxxxxxxxxxxxx>
> Subject: Re: [Pen-l] Fed to start buying commercial paper
> Date: Tue, 7 Oct 2008 16:55:44 -0400
> 
> 
> 
> On Oct 7, 2008, at 4:46 PM, Jayson Funke wrote:
> 
> > Anyone know what will the Fed do with the paper it purchases?
> 
> Collect the interest, probably. It's not likely to go bad.
> 
> Doug
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