The Commercial Paper Market, The Fed, And the 2007-2009 Financial

FEDERAL RESERVE BANK OF ST LOUIS REVIEW NOVEMBERDECEMBER 2009 589

The Commercial Paper Market the Fed and the2007-2009 Financial Crisis

Richard G Anderson and Charles S Gascon

Since its inception in the early nineteenth century the US commercial paper market has grownto become a key source of short-term funding for major businesses with issuance averaging over$100 billion per day In the fall of 2008 the commercial paper market achieved national prominencewhen increasing market stress caused some to fear that given its size and importance the marketrsquosfailure would sharply worsen the recession The Department of the Treasury and Federal Reserveenacted programs targeted at providing credit and liquidity to restore investor confidence Theauthors review the history of the commercial paper market describe its structure and key relation-ships to money market mutual funds and present a detailed discussion of the crisis in the marketincluding the resulting Federal Reserve programs (JEL G01 G24 E52)

Federal Reserve Bank of St Louis Review NovemberDecember 2009 91(6) pp 589-612

The early years of the CP market were domi-nated by issuers in the nonfinancial sectors ofthe economy including transportation and util-ity companies who borrowed by issuing CP towealthy individuals other businesses andfinancial institutions By the twentieth centuryas the demand for durable goods rose and con-sumers began purchasing items on credit the CPmarket became dominated by financial issuersThe rise of MMMFs during the 1970s boostedthe growth of CP by (indirectly) allowing smallinvestors access to CP investments During the1980s the CP market began to develop into itscurrent form particularly with the creation of theasset-backed commercial paper (ABCP) conduit

During the autumn of 2008 some feared thatstress onmdashand potential failure ofmdashthe CP market

F or both small and large American busi-nesses commercial paper (CP) issuanceis an importantmdashand often lower-costmdashalternative to bank loans as a means of

short-term financing Paper is sold in differentforms Some paper is sold unsecured (that iswithout specific collateral) while other paper issecured by bank-issued letters of credit or poolsof assets including a firmrsquos receivables The fundsraised through CP issuance have a variety of usesincluding payroll and inventory finance

CP is important for investors as well Largerinvestors including institutions directly pur-chase CP as a short-term low-risk investmentFor smaller investors money market mutualfunds (MMMFs) intermediate between larger-denomination CP and the liquid smaller-denomination shares that they issue to the public1

Since the inception of the CP market in theearly nineteenth century it has grown such thattoday CP issuance exceeds that of Treasury bills

1 MMMFs purchase low-risk large-denomination securities suchas commercial paper and government securities and issue ldquosharesrdquoat $1 per share

Richard G Anderson is a vice president and economist at the Federal Reserve Bank of St Louis and a visiting scholar at the School of BusinessAston University Birmingham United Kingdom Charles S Gascon is a senior research associate at the Federal Reserve Bank of St LouisThe authors thank Standard amp Poorrsquos Financial Services LLC Moodyrsquos Investors Service and Fitch Ratings for their assistance in the prepa-ration of this article and permission to cite their reports Special thanks is extended to Everett Rutan for his comments on earlier versions

copy 2009 The Federal Reserve Bank of St Louis The views expressed in this article are those of the author(s) and do not necessarily reflect theviews of the Federal Reserve System the Board of Governors or the regional Federal Reserve Banks Articles may be reprinted reproducedpublished distributed displayed and transmitted in their entirety if copyright notice author name(s) and full citation are included Abstractssynopses and other derivative works may be made only with prior written permission of the Federal Reserve Bank of St Louis

might sharply worsen the recession In responsethe Treasury and Federal Reserve enacted pro-grams to restore stability These programs focusedon enhancing market liquidity not on removingdefault risk from the market

THE STRUCTURE OF THE COMMERCIAL PAPER MARKET

In its traditional form CP is an unsecuredpromissory note issued by a business (either finan-cial or nonfinancial) for a specific dollar amountand with maturity on a specific date2 Companiesissue CP as a low-cost alternative to bank loansas it is exempt from Securities and ExchangeCommission (SEC) registration3 CP is generally

issued in large denominations of ($100000 ormore) The maturity on CP averages 30 days butmay range up to 270 days Proceeds from CPissuance are used to finance ldquocurrent transac-tionsrdquo including meeting payroll obligations andfunding current assets such as managing receiv-ables or inventories Figure 1 displays the maturitycomposition of CP issued in 2008 that year themajority of CP had a maturity of less than 1 week

Similar to Treasury bills CP is typically issuedat a discount meaning that the buyer pays lessthan face value and receives face value at maturityThe ldquointerestrdquo is equal to the face value minusthe purchase price Although CP is issued at shortmaturities to minimize interest expense manyissuers roll over CP by selling new paper to payoff maturing paper Because of modest credit riskyields on CP are slightly higher than on Treasurybills of similar maturity Large denominations andshort maturities typically limit the CP market tolarge institutional investors such as MMMFs

CP generally is classified in three broad (butoverlapping) categories nonfinancial financialand asset-backed Further CP may be classifiedas being sold with the assistance of a CP dealer(dealer placed) or without (directly placed)Traditional nonfinancial and financial paperrespectively are unsecured short-term debt issuedby highly rated corporations including industrialfirms public utilities bank holding companiesand consumer finance corporations ABCP on theother hand is more complicated The simplestdescription of ABCP is as a form of securitizationAs the name implies it is CP with specific assetsattached In financial industry jargon ABCP isissued by ldquoconduitsrdquo Conduits are structured tobe bankruptcy remote and limited in purpose4

Each conduit includes a special-purpose vehicle(SPV) that is the legal entity at the center of theprogram and a financial adviser (usually a com-mercial or investment bank) that manages the pro-gram and determines the assets to be purchased

Anderson and Gascon

590 NOVEMBERDECEMBER 2009 FEDERAL RESERVE BANK OF ST LOUIS REVIEW

2 The exception being ABCP which is CP with specific assets attachedas collateral We discuss this type of CP in more detail below

3 CP is exempt from SEC registration if the following three criteriaare met (i) the maturity of the paper is less than 270 days (ii) notesmust be of a type not ordinarily purchased by the general publicand (iii) issues must be used to finance ldquocurrent transactionsrdquo(Hahn 1998)

1-4 days$10343969

5-9 days$90416

10-20 days$66224

21-40 days$1491310

41-80 days$61234

80+ days$104847

Figure 1

Commercial Paper Issuance by Maturity2008 (average $ billions)

SOURCE Federal Reserve Board Volume Statistics forCommercial Paper Issuance

4 Bankruptcy remote refers to all participants in a conduit agreeingnot to force the SPV into bankruptcy prior to a year and a day afterissuance of the conduitrsquos most recent CP this ensures redemptionof all CP Limited purpose refers to issuance of CP as its solebusiness

and the ABCP paper to be issued The owner ofthe conduit receives nominal dividend paymentsand because the SPV does not generally have anyemployees fees are paid to an administrator (nor-mally a bank) to manage the flow of CP and funds

To investors ABCP programs are less trans-parent than traditional unsecured corporate CPmdashthe SPV is an opaque entity that holds assets thatare unknown to the purchaser of the ABCP Perfor -m ance of the ABCP depends on the skill of thebank adviser which essentially is saying to ABCPpurchasers ldquoTrust us with your funds and we willinvest them for yourdquo The degree of disclosure inthe market varies widely Some multiseller5 con-duits provide investors with at least a list of assetsliquidity enhancements and performance historywhereas other more-complex conduits providevery limited disclosure During normal timesyields on ABCP have been approximately 75 basispoints greater than yields on traditional unsecured

CP6 This spread is a continued mystery withnumerous explanations Why should CP withassets attached as collateral pay a higher yieldthan CP with no such collateral Some have sug-gested this spread exists because ABCP is (indi-rectly) being issued by firms unable to directlyissue their own CP However this does not explainwhy ABCP issued by a conduit sponsored (andinsured) by a bank would have a higher yield thanCP directly issued by the same bank lacking anycollateral Moodyrsquos (2009) attributes the yieldpremium specifically to the lack of transparencynoting that traditional CP is relatively easily under-stood while ABCP is issued by an unfamiliar SPVwith assets from anonymous sellers

Because of its role in the 2008 credit crisissome additional discussion of ABCP is valuableCP conduits in their structure are classic finan-cial intermediaries They purchase one or moretypes of financial assets and issue ABCP in their

Anderson and Gascon


5 A bank-sponsored multiseller conduit backs its CP with a diversepool of assets as opposed to a single-seller conduit (eg a conduitsponsored by General Motors Acceptance Corporation) whichbacks its CP with pools of specific assets (eg auto loans)

Table 1Asset Composition of Multiseller Conduits (approx)

2002 2006 2007 2008

Consumer Assets

Credit Card Receivables 419 442 444 459

Auto Loans and Leases 123 138 160 178

Credit Cards 149 105 131 127

Student Loans 10 42 72 85

Residential Mortgages 82 113 48 44

Other Consumer 55 43 31 24

Commercial Assets 515 433 548 440

Trade Receivables 146 154 139 140

Commercial Loans and Leases 66 124 136 129

Equipment Loans and Leases 106 34 36 41

Other Commercial 196 121 147 130

Securities 66 125 97 101

Total (percent) 100 100 100 100

SOURCE Moodyrsquos ABCP Query Data are the share of total outstanding as of year-end

6 This spread can be calculated using rates on AA-rated CP reportedin the Federal Reserve Board volume statistics on CP issuance Thespread changes depending on the issue type (financial or nonfinan-cial) and maturity chosen

own name Their business purpose is to arbitragerisk and rate spreads between the assets they pur-chase and the liabilities they issue ABCP conduitscome in many types The largest type is multi-seller conduits The major cost to a multisellerABCP conduit is the insurance of risk To insurerisk conduits pay fees to a liquidity provider(rollover risk) and a credit-enhancement provider(default risk)

ABCP issued by multiseller conduits is oftenused to finance the purchase of consumer andcommercial assets (Table 1) A firm that sellsreceivables to a conduit frees its own funds and

reduces its need to borrow Large creditworthyfirms typically sell their paper directly to investorsvia an agent or dealer a practice referred to as aldquosingle-seller conduitrdquo Smaller firms howeverfind this method costly and prefer to operate viaa multiseller ABCP conduit in which the firmsells its debts to a bank-advised SPV which inturn sells ABCP to investors Large firms may alsouse multiseller ABCP conduits as an additionalsource of liquidity in cases when they have a quickturnaround on trade receivables that are not largeenough to warrant ldquotraditionalrdquo CP issuanceUnrated firms may also lower borrowing costs

Anderson and Gascon


Debtor Debtor Debtor

Seller

Investor

InvestorInvestor

Investor

Investor

Investor

Investor

ABCP Conduit


Seller


Seller

Cas

h

Deb

tA

BC

PA

BC

P

Cas

hC

ash

Payments onmaturing ABCP

Purchases ofnew ABCP

Issuing and PayingAgentDealer

Figure 2

ABCP ConduitsmdashBanking Without a Bank

NOTE See Figure 3 for additional details

via multiseller conduits by paying a spread tothe conduit sponsor

Figures 2 and 3 outline the securitization ofassets through a multiseller ABCP conduit At thetop of the diagram are debtors (ie individualsor businesses) who borrow money from sellers(ie mortgage lenders or banks) In the center ofFigure 2 is the ABCP conduit its SPV is illustratedin Figure 3 The ABCP SPV purchases from thesellers the debt at some price less than face valueThis overcollateralization (or ldquohaircutrdquo) providesan equity cushion to CP investors Because findingsuitable investors may be costly the ABCP SPVhas a relationship with a dealer (ie an invest-ment bank) who suggests a price and finds suit-able investors

Because the maturity on the CP is shorter thanthe maturity on the original loans the ABCPconduit will roll over the maturing CP to payinvestors As with any CP program rating agen-cies require ABCP conduits to obtain liquiditybackstops on each transaction to assume muchof the rollover risk Liquidity providers will nor-mally provide funds on non-defaulted assetsBecause there is always a risk that some debtorsfail to make payments investors require additionalprogram-wide credit enhancements generally inthe form of a bank letter of credit or insurancecompany surety bond on some fraction of the

maximum program size7 Normally these agree-ments require payment by the provider once othersources of funds have been exhausted In manycases the administrator is the same bank provid-ing the liquidity and credit enhancements As aresult the credit rating of the conduit is closelyrelated to the credit rating of liquidity and creditproviders as well as the reputation of the manag-ing party

Table 2 shows the composition of CP outstand-ing by issuer and placement type The top tworows report the average amount outstanding in2001 and 2008 and the bottom two rows reportshares as a percentage of the total For each issuerthe average amount outstanding is disaggregatedby the placement type For example during 2001financial CP outstanding averaged $6170 billion(414 percent of the total) of which $3365 billionwas placed by dealers (226 percent of the total)and $2806 billion was directly placed (188 per-cent of total) On average 90 percent of outstand-ing CP was either ABCP or financial CP in 2008

A firm ordinarily requires a dealer to place itspaper if it lacks the name recognition necessary

Anderson and Gascon


7 This really applies only to bank-sponsored multiseller programsSecurities arbitrage programs have recently added letters of creditwhile structured investment vehicles use overcollateralizationor sell subordinate notes Single-seller conduits tend to use overcollateralization

Special PurposeVehicle

Deb

tA

BC

P

Cas

hC

ash

Credit EnhancementProviders

Administrator

Liquidity Providers

Owner

Fees Fees

Fees Dividends

Credit Support Liquidity

Figure 3

Typical ABCP Conduit

SOURCE Adapted from Moodyrsquos (2003)

to attract investors or if its funding requirementseither are too limited or infrequent to warrantbuilding its own distribution system Direct issuersof CP most of them traditional issuers borrow insufficient size and frequency that the costs ofdeveloping an in-house distribution system areless than the costs of placing paper through adealer For nonbanks an in-house system maybecome profitable if CP issuance reaches $500million or more Mostly the major finance com-panies and large banking organizations that alsodistribute wholesale liabilities (such as certifi-cates of deposit [CDs]) place their paper directlyOnly a few nonfinancial firms are direct issuersof paper

Many companies build close relationshipswith their dealers If a company is willing to sellits paper at the dealerrsquos suggested price the dealerwill agree to purchase unsold paper Yet relation-ships with dealers may be problematic and are notexplicitly guaranteed Market intelligence suggeststhat dealer relationships for multiseller conduitswere ldquostrained to the breaking pointrdquo during thefall of 2007 and ldquocollapsedrdquo for many single-seller and securities arbitrage conduits Generallyaccording to dealer reports in Stigum and Crezcenzi(2007) ldquocompetition among dealers is fierceata 70 percent utilization rate you maybe break evenor are losing a bit of money[at a] 90 percentutilization rate you begin to make real profitsrdquoDealers charge clients a fee that is less than one-eighth of 1 percentage point which in 2008

translated into roughly $150 million in dailyfees on $120 billion of CP issued daily8

THE DEVELOPMENT OF THECOMMERCIAL PAPER MARKET

In the early years of the CP market the nine-teenth century nonfinancial firms (includingtextile mills and railroad companies) were themajor issuers of paper By the early twentiethcentury particularly following the founding ofGeneral Motors Acceptance Corporation (GMAC)in 1919 the CP market expanded to include finan-cial paper After World War II increased sales ofdurable goods on credit (especially televisionsand automobiles) encouraged expansion of con-sumer finance companies and in turn the CP mar-ket (Stigum and Crezcenzi 2007 Chap 3) Latereven for business purposes such as financinginventory and raising cash for current operatingexpenses CP increasingly replaced bankersrsquoacceptances as the instrument of choice for short-term financing

Figure 4 shows the trend in the amount of CPoutstanding (all issue types) since 1952 Prior to2000 the CP market grew steadily as both borrow-

8 Data on daily issuance of dealer paper are not available the cal-culation assumes 80 percent (the percentage of total outstandingissued by dealers) of the average daily issuance is placed by dealersThe dealer fee of 00125 percent is from Stigum and Crezcenzi(2007 p 989)

Anderson and Gascon


Table 2Commercial Paper Outstanding by Issuer and Placement

Financial Nonfinancial Asset-backed All types

Dealer Directly Total Dealer Directly Total Dealer Directly Total Total

Total (average) $ billions

2001 3365 2806 6170 2059 385 2444 5008 1276 6284 14898

2008 5522 2315 7837 1746 171 1917 6631 1004 7636 17393

Share (percent)

2006 226 188 414 138 26 164 336 86 422 1000

2008 317 133 451 100 10 110 381 58 439 1000

SOURCE Federal Reserve Board Volume Statistics for Commercial Paper Issuance

Anderson and Gascon


0

50

100

150

200

250

300

350

1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986

NSA ($ Billions)

0

500

1000

1500

2000

2500

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

NSA ($ Billions)

Figure 4

Quarterly Commercial Paper Outstanding (1952-1986 and 1987-2009)

SOURCE Federal Reserve Board Flow of Funds Table L208

ers and investors shifted into CP from alternativemoney market instruments including Treasurybills bankersrsquo acceptances and CDs9 The down-turn that took place in the 2000 is discussed furtherbelow In 1970 CP comprised only one-quarter ofthe dollar volume of outstanding money marketinstruments in 2006 it comprised two-thirds(Stigum and Crezcenzi 2007 p 967)

The introduction of MMMFs in 1971 had alarge and long-lasting impact on the CP marketFueled initially by rising demand for consumerdurables growth of the CP market was ignited inthe 1970s by widespread investor enthusiasmfor MMMFs For savers and investors MMMF

shares were an attractive alternative to bankdeposits for corporate borrowers CP was anattractive alternative to bank loans Assets ofMMMFs increased sixfold between 1980 and theend of 1991 (Table 3) During the period spanning1972-92 MMMFs on average held 182 percentof all outstanding CP in 2008 it was almost 40percent The increase in MMMF holdings was notsteady During three years (1978-81) the share ofCP held by MMMFs soared to 32 percent from lessthan 1 percent subsequently remaining near 30percent At year-end 1991 the MMMF industryheld about one-third of all CP outstanding andwas the largest single investor Holdings of CPby foreign investors on the other hand haveincreased gradually since the early 1990s (InTable 3 the share held by funding corporations

Anderson and Gascon


Table 3Major Holders of Commercial Paper

Percent $ Billions

1952-1971 1972-1991 1992-present 2008 2008

Money Market Mutual Funds mdash 182 347 385 6156

Funding Corporations 33 115 129 230 3675

Foreign Sector 156 46 95 146 2332

State amp Local Governments mdash mdash 81 77 1238

Security Brokers amp Dealers mdash 47 30 41 657

Mutual Funds 33 26 57 33 520

Life Insurance Companies 22 75 52 27 428

Private Pension Funds mdash 82 28 23 369

State amp Local Gov Retirement Funds mdash 08 32 20 319

Commercial Banking 184 75 04 09 150

Nonprofit Organizations 427 233 82 07 104

Nonfarm Nonfinancial Corporate Business 140 90 40 03 47

Monetary Authority 05 mdash mdash mdash 00

Savings Institutions mdash 12 mdash mdash mdash

Credit Unions mdash 01 01 mdash mdash

GSEs mdash 06 21 mdash mdash

Total (percent) 1000 997 1000 1000

Total ($ billions) 133 2629 12344 15995 15995

NOTE Data reported are for open market paper which contains both CP and bankers acceptances CP comprises 85 percent ofopen market paper over the sample and 99 percent since 1998


9 See Anderson (2009ab) for a discussion of bankersrsquo acceptancesToday the bankersrsquo acceptance market is moribund overtaken by CP

is the residual holdings not accounted for by theother categories)10

Problems in the Early Years The Penn Central Collapse

Penn Central railroad was a major issuer ofCP with approximately $84 million outstandingin the summer of 1970 As the companyrsquos cashflows dwindled debt holders pushed for govern-ment assistance that would have allowed PennCentral to repay maturing CP The assistance planfailed and on June 21 1970 Penn Central filedfor bankruptcy (Calomiris 1994) The bankruptcyof Penn Central rattled the CP market The econ-

omy was already in recession and the financialhealth of the company had apparently deterioratedin a matter of months Market participants becameworried that other highly rated CP issuers couldbe in a similar position

In the years before the collapse the CP markethad experienced rapid growth and appeared tobe isolated from economic downturns Figure 5indicates that total CP outstanding did not declineduring either of the prior recessions Because themarket had not previously experienced suchstress lenders were uncertain of potential spill -over effects of the bankruptcy including theinability to roll over existing paper at maturityThe unwillingness of the Congress and the FederalReserve to ensure payment of Penn Centralrsquos debtleft creditors facing substantial losses In responseto the crisis the Fed encouraged member banksto borrow at the discount window and make loansto CP issuers11 According to reports at the time

Anderson and Gascon


11 See Calmoris (1994) for additional details

10 Funding corporations consist of four types of financial institutionsand entities (i) subsidiaries of foreign banks that raise funds inUS markets and transfer proceeds to foreign banking offices inthe United States (ii) subsidiaries of foreign banks and nonbankfinancial firms that raise funds in the United States and transferthem to a parent company abroad (iii) nonbank financial holdingcompanies and (iv) custodial accounts for reinvested collateralassociated with securities-lending operations

0

5

10

15

20

25

30

35

40

45

50

1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972

NSA ($ Billions)

June 21 1970Penn Central Bankruptcy

Figure 5

Monthly Commercial Paper Outstanding (1953-1974)

SOURCE Board of Governors (1976) and Federal Reserve Board Commercial Paper Statistics

discount window borrowing to finance CP roll -overs reached $500 million in the weeks follow-ing the collapse The actions of the Fed assuredfinancial markets that the liquidity needed tomeet obligations would be available Neverthelessoutstanding CP declined by 21 percent duringsubsequent quarters before turning upward inthe second quarter of 1972 Eventually the marketregained its confidencemdashCP grew steadily forthe next three decades However after the crisisCP issuers were more reserved and began secur-ing lines of credit in case of market disruptions

The Adolescence of the US CommercialPaper Market 1980-199212

The US CP market matured during the 1980sAt the beginning of the decade issuance wasprimarily by a small number of large prominentand creditworthy companies During the decadeeverything changed The marketrsquos size grew five-fold New issuers and dealers arrived while someolder issuers disappeared New forms of paperwere introduced most importantly ABCP

In the 1980s corporate borrowers faced pay-ing relatively high rates (compared with historicalexperience) on both long-term funds (bonds) andbank loans owing in part to robust economicgrowth A less costly alternative was issuance ofCP which grew rapidly Many new issuers wereattracted to the market including smaller UScorporations foreign corporations and foreignfinancial institutions The development of a mar-ket in currency swaps allowed foreign borrowersto combine US dollar-denominated CP issuancewith swaps so as to create liabilities in other cur-rencies ABCP also came into general use provid-ing off-balance-sheet financing for trade and creditcard receivables Finally the growth of MMMFscoupled with a shift in the composition of theirinvestments toward CP made them the largestsingle source of funds to the market (see Table 3)

A series of defaults on CP that began in 1989caused tighter regulations to be imposed on MMMFholdings of medium-grade paper Heightenedinvestor concerns effectively forced many medium-

quality issuers to cut back sharply on their use ofthe CP market Increasing costs also changed therole of banks in the CP market Financial stressat banks became manifest in the pressure frommarkets and regulators to increase their capitallevels which in turn increased their costs of pro-viding letters of credit and backup liquidity tothe CP market Partially offsetting this effect interms of overall CP market volume were effortsof banks to increase loan rates and margins onloans Growth of the CP market was neithersmooth nor painless The composition of firmsissuing CP changed as defaults reduced investorappetite for medium-grade paper At times issuersreturned to banks finding bank loans less expen-sive than CP

Defaults of CP are rare Between 1971 andmid-1989 no defaults occurred in US CP exceptfor the litigation-driven default by ManvilleCorporation in 1982 (Post 1992 p 888) In mid-1989 the US CP market was hit with threedefaults four more followed in 1990 Becausefund advisers injected capital to cover the short-falls investors incurred no losses The SEC sub-sequently tightened Rule 2a-7 to generally requiretwo ratings on CP held by money funds and tolimit a fundrsquos holdings of a single firmrsquos paper(p 889)Growth of the paper market slowed there-after and some medium-grade issuers found bor-rowing at banks less expensive13

The financial markets calmed after 1990 andwere capable of handling the funding needs ofmedium-grade firms Medium-grade issuerssuccessfully tapped bank lines of credit or theirCP dealers while ABCP absorbed some of theneeds of these firms and grew rapidly Butinvestors remained wary of medium-gradepaper Interest rates on it spiked again both atmidyear and at year-end 1991 because manyinvestors did not want to show such holdingson their published financial statements TheJune 1991 default of Columbia Gas a second-tier issuer renewed concerns about the safetyof medium-grade paper (p 889)

12 This section is based on Post (1992)

Anderson and Gascon


13 New Basel Accord risk-based capital guidelines for banks adoptedin 1988 would become effective at year-end and market partici-pants grew increasingly uncertain about the capacity of banks tohonor all their loan commitments As a result rates paid on CPeven by highly rated firms jumped in December 1990 This provedhowever to be the point of maximum stress

Issuers at the end of the 1980s differed greatlyfrom those at the beginning At the end of 1989about 1250 corporations and other entities hadpaper programs in the US CP market 500 morethan in 1980 Many new issuers were foreign firmsand smaller lesser-known US firms previouslyCP issuers almost uniformly were large well-known US corporations

The Growth in Dealer-Placed FinancialPaper Throughout the life of the CP marketmethods of issuance have continued to evolveDuring the 1980s direct issuers expanded rapidlyEarly in the decade approximately 60 percentof all CP was sold directly by issuers to investors(p 883) Among the more important issuers werelarge finance companies these grew rapidly afterthe Economic Recovery Tax Act of 1981 promotedbusiness use of leasing

Bank holding companies continued to use theCP market to support parent company opera-tions including leasing and lending by non-bank subsidiaries By the end of the decadeoutstanding paper placed directly by financialfirms surpassed $200 billion more than triplethe level at the start of the decadehellip[Yet evenfaster growth was experienced by firms thatused dealers for distribution]hellipBy 1989dealer-placed paper accounted for 60 percentof all CP outstanding up sharply from about40 percent at the start of the decade (p 883)

In part the growth was supported by FederalReserve Board rulings in 1986 and 1987 thatauthorized certain so-called Section 20 subsidi -aries of bank holding companies to deal in CPto a limited extent by year-end 1991 these sub-sidiaries accounted for about 14 percent of out-standing dealer-placed paper And by December1990 dealer-placed financial CP outstanding sur-passed the amount of directly placed financialCP (p 884)

The increased share of dealer-placed paperalso reflected in part the changing compositionof issuers Dealers were required for the aggres-sive marketing needed to package and sell newissuers and new types of CP programs

During the mid- to late 1980s the presence offoreign financial institutions in the US marketgrew and these firms generally required dealer

assistance to promote their names to USinvestors By year-end 1991 these firms hadoutstanding CP in excess of $110 billionslightly more than half of all dealer-placedfinancial paper Highly rated foreign banks(or their US subsidiaries) accounted for 55percent of this paper (pp 884-85)

The Growth in Guaranteed Paper Thegrowth in guaranteed paper is described by Post(p 884)

The share of CP programs that were fully (100percent) enhanced by credit guaranteesmdashoftenbank letters of creditmdashfrom highly rated thirdparties grew dramatically in the first half ofthe decade In fact programs with such creditenhancements accounted for about all the netincrease in the number of CP issuers rated byMoodyrsquos over that period Presumably most ofthese programs were small because their out-standing CP accounted for less than 10 percentof all outstanding paper

Because investors in such paper rely on theguarantor rather than the issuer to make pay-ment in full upon maturity of the paper thepaper carries the rating of the guarantorWhereas traditional issuers entered the marketon the strength of their own credit quality(or that of their parent) many of the new CPprograms of the first half of the 1980s gainedaccess to the market on the strength of guaran-tees by unrelated entities

Introduction of the Asset-Backed CommercialPaper Conduit The decadersquos second innovationand perhaps its most important was the intro-duction of the bank-advised ABCP conduit in198314 The structure of the typical multisellerABCP conduits was discussed previously Whenconsidered solely by their economic functionssuch conduits essentially are regarded as ldquobankswithout banking chartersrdquo The motives at thetime of their introduction are well described byPost (1992 p 886)

The development of the asset-backed sectorof the CP market arose from several factorsUS banking organizations saw an opportu-nity to generate fee income from potentialparticipants in their programsmdashmany of

Anderson and Gascon


14 See Kavanaugh Boemio and Edwards (1992)

which were the same investment-grade firmsthat they had lost as loan customers to the CPmarket These banking organizations alsobecame more familiar with asset securitiza-tion This similarity resulted in part fromincreased market and regulatory pressure toincrease their capital ratios Asset securitiza-tion and asset-backed CP in particular per-mitted banks to channel would-be borrowersto funding off of bank balance sheetsAnother factor was that financial marketsbecame increasingly familiar with and thusmore willing to accept programs thatrequired structuring such as those withcredit guarantees Dealers saw opportunitiesto market asset-backed programs to compa-nies seeking to increase liquidity or to reduceleverage regardless of size or ratingMoreover they already had proved success-ful in marketing lower-rated firms to the CPmarket via guaranteed programs and realizedthat a pool of potential business existed incompanies that were too small to tap the CPmarket through their own guaranteed pro-grams Thus banking organizations formedbank-advised asset-backed programs relyingon dealers

ABCP conduits increased in number from 3 in1985 to 89 by year-end 1991 Between 1990 and1991 ABCP programs accounted for virtually allthe increase in domestic CP issuers By year-end1991 ABCP accounted for about 9 percent of alloutstanding CP

In circumstances reminiscent of the 2008credit crisis credit problems at sponsoring bankholding companies slowed the growth of ABCPpaper during the 1989-92 credit crisis Cantor andRoriques (1994) report that the perceived creditrisk of CP increased as the number of defaults onCP ldquosoaredrdquo (p 171) and the number or down-grades outpaced the number of upgrades between1988 and 1989 (p 194) ABCP conduit ratingswere downgraded as large loan losses and theneed to raise capital ratios reduced the ratings ofsponsoring banks Outstanding CP of bank holdingcompanies (almost all directly issued) decreasedfrom a peak of $52 billion in January 1990 to $24billion at year-end 1991

The Maturation of Commercial Paper1992 to Fall 2007

This era of the CP market is characterized bythe steady decline in the prominence of nonfinan-cial CP and the continued rise in ABCP Accordingto Moodyrsquos (2009) ABCP entered the mainstreamof money market instruments during the mid-1990s as more institutional investors began tosignificantly increase their holdings The ABCPmarket enlarged in the late 1990s when the com-mercial bank advisers to ABCP conduits discov-ered arbitrage opportunities in the securitizationof asset-backed securities residential mortgage-backed securities and collateralized debt obliga-tions In general the arbitrage opportunities arosebecause the longer-term securities purchased byABCP conduits carried yields in excess of theLondon Interbank offering rate (LIBOR) whilethe conduits could issue short-term (1- to 4-day)ABCP at rates no higher than LIBOR (Standard ampPoorrsquos 2008) Because the rate differential largelyreflects the unhedged term premium and theuncovered rollover funding risk success of thearbitrage depends on the premium not movingsharply

The Decline in Nonfinancial CommercialPaper Interaction between the CP market andother types of finance driven by changes inrespective yields is illustrated by the decreasein nonfinancial CP outstanding during the 2000recession Beginning in 2000 total nonfinancialCP outstanding dropped by almost 50 percentin just over 2 years (Figure 6)

Shen (2003) concludes that ldquoaggressive inven-tory reduction and the widespread practice ofreplacing [CP] with longer term corporate bondshave reduced the demand for credit in the [CP]marketrdquo Because nominal rates were relativelylow following the 2000 recession businesseselected to reduce uncertainty about future borrow-ing costs by reducing holdings of CP and issuingbonds at low interest rates Subsequent data havesupported Shenrsquos view The share of nonfinancialbusinesses borrowing through the CP marketdeclined from 54 percent between 1995 and2000 to 23 percent between 2001 and 2008 Atthe same time the share of nonfinancial borrow-

Anderson and Gascon


ing through corporate bond issuance increasedfrom 459 percent (1995-2000) to 544 percent(2001-08)15

Innovations in Asset-Backed CommercialPaper In 2003 additional innovation changedthe internal dynamics of ABCP conduits Pre -viously typical conduit programs required threeplayers in supporting roles the adviser the liquid-ity enhancer and the credit enhancer At timesone commercial or investment bank would playall three roles but to avoid self-dealing and con-flict of interest the roles typically were playedby two or three separate banks Seeking toincrease profits some bank advisers brought tomarket ABCP conduits without liquidity andcredit enhancers instead the advisers asserted

that the conduit would rely on its own ldquointernalliquidityrdquo to satisfy all obligations (ie securitiesarbitrage ABCP conduits) Maturing CP that isnot rolled over for example would be paid offwith cash flows generated either from the yieldson the assets themselves or by selling the assets(Standard amp Poorrsquos 2008)16 Nationally recognizedstatistical rating agencies generally accepted theadvisersrsquo assertions but required that such con-duits maintain a ldquocushionrdquo between their ABCPoutstanding and the market value of the securitiesthey hold According to Standard amp Poorrsquos (2008)

Anderson and Gascon


16 These conduits are commonly referred to as securities arbitrageABCP conduits Generally speaking the structures of nonbankinvestment vehicles such as hedge funds closely resemble eachother although the terminology differs For hedge funds the invest-ment manager handles the portfolio choices and usually is paidbased on performance the administrator handles back-office tasksincluding issuing and redeeming shares calculating net asset valueand measuring fund performance the prime broker or custodianhandles clearing and settlement money lending and similar invest-ment banking tasks In some cases the roles of administrator andinvestment adviser are performed by the same firm

15 Shares are calculated using data from the Federal Reserve Flow ofFunds table L2 for example the share of nonfinancial CP borrow-ing is nonfinancial CP outstanding divided by nonfederal loansoutstanding (net municipal loans mortgages and consumer creditloans)

0

100

200

300

400

500

600

1958 1964 1970 1976 1982 1988 1994 2000 2006

$ Billions

InventoriesNonfinancial Commercial Paper

Figure 6

Nonfinancial Commercial Paper Outstanding and Manufacturersrsquo Total Inventories

SOURCE Federal Reserve Board Census Bureau

over half of the conduits established between2004 and 2007 relied at least in part on internalliquidity Acharya Gale and Yorulmazer (2009)present a theoretical model of market freezes inwhich ABCP conduits take a structure very sim-ilar to securities arbitrage conduits The modelexplains why markets such as ABCP that rollover debt can experience sudden freezes

THE RECENT FINANCIAL CRISISAND THE COMMERCIAL PAPERMARKET

Financial crises often are defined by sharpincreases in the price of riskmdashthat is the premiumthat investors require to purchase investmentsthat they previously bought at a much lower yieldCP is a financial instrument particularly suscep-tible to such an increase in risk premiums Whatis not clear however is the relative importanceof investorsrsquo willingness to (i) bear risk and (ii)endure a potential decrease in their liquidityClearly both affect CP market difficulties to somedegree Holders of unsecured traditional CP maysuffer significant losses if the issuer fails inrecession the profit outlooks for most firms dimIn addition most issuers repay maturing paperby rolling it over if paper cannot be rolled overand if the issuersrsquo banks do not extend credit topay the holders repayment to the holders maybe delayed for a considerable period Layered ontop was an increased fear that financial assetsexcept for US Treasuries could not be resold toother investors

The CP market achieved national prominencein the fall of 2008 Heightened financial marketuncertainty followed the failure of LehmanBrothers on September 15 Investors and lendersuncertain of both the creditworthiness of coun-terparties and their own ability to borrow in thefuture (if necessary) shortened commitments andshifted away from CP-based products towarddefault risk-free assets including MMMFs investedsolely in US Treasuries Borrowers argued thata near closure of the market would sharply worsenthe recession Suddenly the term ldquoshadow bank-ing systemrdquo came into common usage17

Market Events 2007 and 2008

Difficulties in the CP market were apparentduring the fall of 2007 Issuance of ABCP heavilyused by mortgage originators to bridge the financ-ing gap between origination and securitizationbegan to plummet Mortgage lenders had backedtheir paper with pools of home loans awaitingsecuritization Write-downs on mortgage-relatedassets caused investors in ABCP to become waryof the underlying assets A small portion of ABCPissuers (roughly 10 percent) exercised the optionallowing them to extend the maturity of theirborrowings thereby cramming longer maturitiesdown to investors expecting repayment (Sahn-Bubna 2007) In addition as the market value ofresidential mortgage-backed securities fell ABCPconduits relying on internal liquidity began to failldquocushion testsrdquo In some cases conduits wereforced to sell securitiesmdashbut into a fearful sec-ondary market with few buyers Between August6 and 14 2007 four conduits (representing 12percent of the ABCP market) failed their cushiontests and liquidated their portfolios (Standard ampPoorlsquos 2008) Between August 2007 and July 200827 ABCP conduits with business plans that reliedat least in part on internal liquidity exited themarket (Moodyrsquos 2009)

Figure 7 illustrates the boom and bust in theABCP market since 2001 Until 2005 the totalamount of CP outstanding was relatively stableBetween early 2005 and the summer of 2007 theamount outstanding doubled reaching a peak of$12 trillion in July 2007 As the ABCP marketcollapsed some conduits were unable to roll overtheir paper resulting in defaults (Keogh 2007)Investors became increasingly worried that bankswhich provided liquidity facilities to the conduitswould be unable to support them (Mollenkamp2007) Covitz Liang and Suarez (2009) explainhow ABCP programs experienced a series of ldquorunsrdquobetween August and December 2007 Many runswere directly linked to the credit and liquidityexposures of individual programs However theauthors provide evidence that the ABCP marketwas subject to a panic reminiscent of the banking

17 The term ldquoshadow banking systemrdquo refers to those non-bank insti-tutions such as ABCP conduits that provide funds to businesses

Anderson and Gascon


panics during the Great Depression in whichruns on some programs were not even related toprogram fundamentals Broad-based investorconcerns that sponsoring banks would be unableto meet their commitments if numerous programsrequired support at the same time caused exten-sive withdrawals Startled investors began to shifttheir holdings from MMMFs invested in ABCPtoward MMMFs invested solely in Treasuries(Figure 8)

Difficulties increased during 200818 CP out-standing in December 2008 was $125 billion lowerthan it was a year earlier with ABCP paperaccounting for half that decrease ($64 billion)At year-end 2008 the amount of outstandingABCP paper was approximately the same as atyear-end 2005 Because much of the intervening

increase in ABCP paper was mortgage relatedthe decrease was not unexpected as the housingmarket cooled Moodyrsquos (2009) reports that thenumber of ABCP programs declined to 244 from265 writing that the ABCP market ldquois returningto one of primarily bank-sponsored multi-sellerprograms much as it was a decade agordquo Moodyrsquos(2009) reports taking rating actions (that is reduc-ing or reconsidering ratings) on seven ABCP pro-grams during 2008 in all but one case the actionreflected a weakening of an underlying supportparty (that is the liquidity or credit enhancerusually a bank) Advisers to ABCP conduits strug-gled to sustain their outstanding issues one ABCPprogram defaulted because of decreases in theprices of its assets On occasion advisers to ABCPconduits shouldered the responsibility for offset-ting asset losses Nine program advisers declaredtheir intent to financially support their affiliatedABCP programs Many other advisers provided

Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)

ABCP Outstanding (left axis)ABCP Issuance (right axis)

Figure 7

Average Monthly ABCP Issuance and Outstanding

NOTE Issuance is only AA rated


18 This section draws heavily on Moodyrsquos Investors Service reportldquoABCP 2008 Year in Review and 2009 Outlookrdquo February 10 2009For additional details see Fitch Ratings (2008ab 2009)

support for individual assets or purchased assetsfrom the conduit to maintain the conduitrsquos creditquality

The Lehman Brothers bankruptcy onSeptember 15 2008 was a major disruption tothe CP market During the months prior to bank-ruptcy investors had faced a difficult choiceSell Lehmanrsquos paper at a loss on the rumor offailure or wait and pray for the rescue of LehmanLehmanrsquos failure brought immediate stress onthe CP market The following day at 11 am the$62 billion Reserve Primary Fund ldquobroke the buckrdquo(that is its net asset value fell below $0995 pernominal share) by writing its Lehman investments(with face value of $785 million) down to 80 centsper share at 4 pm when it wrote the investmentsdown to zero the fundrsquos net asset value per sharereportedly fell to 97 cents and the fund restrictedredemptions (Henriques 2008) Prior to theReserve Fund actions it had been 14 years sinceinvestors in MMMFs had experienced a loss in

that case investors were paid 96 cents per shareat liquidation

Investors in institution-type MMMFs includ-ing corporate cash managers often use the fundsin a manner similar to bank deposits and with-draw the funds on short notice Losses of courseare undesiredmdashbut a suspension of redemptionsis intolerable At that point the issue became acrisis of liquidity Reacting to redemption restric-tions investors shifted more than $400 billionfrom ldquoprimerdquo money funds (invested in CP andother instruments) to money funds invested inTreasuries Shares in prime funds dropped from$13 trillion on September 9 to $864 billion onOctober 7 while government-only institution-type funds increased by more than $350 billion(Moodyrsquos 2009) The portfolio reallocation inMMMFs is portrayed in Figure 8 In July 2007approximately 11 percent of MMMFs portfolioswere composed of government securities (ieTreasury bills) by January 2009 an average of

Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Share of Total Holdings (percent)

Government SecuritiesCPCorporate NotesOther

Figure 8

Asset Holdings of Taxable Money Market Mutual Funds

NOTE Prior to 1998 Corporate Notes are included in the Other category

SOURCE Investment Company Institute

40 percent of a fundrsquos portfolio was made up ofgovernment securities At the same time theshare of CP fell from roughly 32 percent to under20 percent Retail-type money funds held pri-marily by households but also by smaller busi-nesses were little affected Quickly howeverMMMFs that were invested in mortgage-relatedassets came under pressure Assistance came frombanks and fund managersmdashpublished reports saidmore than $10 billion was pledged Neverthelessthe demand for CP fell Issuance dropped andbrokers and dealers were forced to retain elevatedinventories at the end of 2008rsquos third quarterdealers held $154 billion of ABCP for sale 78percent more than a year earlier19 It becamedifficult to place ABCP for terms longer thanovernight over night issuance increased fromapproximately 60 percent of the total to as muchas 90 percent Federal Reserve Board data show

however that total issuance decreased littlemdashthe effect of heightened uncertainty was reflectedin investorsrsquo unwillingness to commit liquid fundsfor more than one day at a time Hence the crisiswas primarily one of liquiditymdashldquoIf I lend todaybut need to borrow tomorrow will anyone thenlend to merdquomdashrather than of heightened defaultrisk

The degree of stress in the ABCP market isreflected in short-term funding rates all of whichincreased sharply mid-September both in absolutelevel and relative to overnight federal funds(Figure 9) In normal times CP yields (especiallyon ABCP) only slightly exceed those on compa-rable Treasuries Yet two prominent spikes areevident in the ABCP rate late-August to early-September 2007 when mortgage-related write-downs began and the most prominent inSeptember 2008 A large factor in the September2008 spike was the scramble by CP issuers for fundswhen MMMF demand for CP collapsed (Moodyrsquos2009)

Anderson and Gascon


19 These increases were short-lived By the fourth quarter of 2008brokers in dealers were able to shed roughly 60 percent of theirholdings

000

100

200

300

400

500

600

700

800

Jan-02 Oct-02 Jul-03 Apr-04 Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09

Rate (percent)

1-Day Asset-Backed CP (AA-Rated)1-Day Financial CP (AA-Rated)1-Day Nonfinancial CP (AA-Rated)Fed Funds Target

Figure 9

Selected Overnight Interest Rates

SOURCE Federal Reserve Board Table H15

Recent Treasury and Federal ReservePrograms

Following mid-September 2008 market dis-ruptions the Treasury and Federal Reserve intro-duced programs to enhance liquidity in two ways(i) by reducing extension risk that is the riskthat an investor will not repay maturing CP in atimely fashion either by rolling the paper or bankborrowing and (ii) by reducing the risk of sus-pension of redemptions at MMMFs that hold CPThe Treasury in an effort to assure investors thatfuture suspension of redemptions would notoccur offered insurance for the value of MMMFshares held as of September 18 at funds choos-ing to participate in its program20 The FederalReserve introduced three programs with variedobjectives including assuring money fund man-agers that their CP could be sold quickly if nec-essary and providing a funding facility that issuers

of highly rated paper could use as a backstop ifrollover failed

The assets on the Fedrsquos balance sheet areshown in Figure 10 In response to the financialcrisis the Fed created numerous lending programscausing its total assets to increase from under $1trillion to over $2 trillion21 The two dark-blueareas represent the assets held by two programsfocused on the CP market the Commercial PaperFunding Facility (CPFF) and the Asset-BackedCommercial Paper Money Market Fund LiquidityFacility (AMLF) Roughly 15 percent of the Fedrsquosassets were acquired through these programs Bycomparison less than 1 percent of the Fedrsquos assetswere acquired from Bear Stearns or loans toAmerican International Group (AIG) We revieweach of these programs below

Money Market Investor Funding FacilityThis program was authorized by the Federal

Anderson and Gascon


000

050

100

150

200

250

Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09

$ Trillions

Other AssetsCPFFAMLF

Figure 10

Federal Reserve Assets (EOP Wednesday)

SOURCE Federal Reserve Board H41 Table 9

21 See Gavin (2009) and Gascon (2009) for discussion of other Fedlending programs and their impact on the Fedrsquos balance sheet20 See US Department of the Treasury (2008) for additional details

Reserve Board on October 21 2008 under theprovisions of Section 13(3) of the Federal ReserveAct22 The Board describes the program as allow-ing the Federal Reserve Bank of New York toprovide credit to ldquoa series of special purposevehiclesrdquo established ldquoby the private sectorrdquo topurchase from eligible investors ldquocertain highlyrated short-term instruments including certifi-cates of deposit bank notes and CPrdquo Essentiallythe SPVs would be authorized to purchase bankdebt or CP forcibly sold into the market as a resultof a run on a bank or money fund This programhad no activity and expired on October 30 2009

Asset-Backed Commercial Paper MoneyMarket Mutual Fund Liquidity Facility Createdon September 19 2008 the AMLF essentiallyallows money market funds indirect access to theFederal Reserve discount window via a deposi-tory financial institution The Federal ReserveBoard describes this facility as follows

[AMLF] is a lending facility that provides fund-ing to US depository institutions and bankholding companies to finance their purchasesof high-qualityABCP from money marketmutual funds under certain conditions Theprogram is intended to assist money fundsthat hold such paper in meeting demands forredemptions by investors and to foster liquidityin the ABCP market and money markets moregenerally

Because money funds themselves are not eligibleto borrow at the discount window to borrow underAMLF they first must sell ABCP to an eligibledepository institution Similar to other programsthat seek to assure investors that a suspension ofredemptions will not occur in the future onlyABCP owned prior to the AMLFrsquos inception iseligible Assets of the AMLF initially expandedrapidly reaching a maximum of $152 billion inits second week (the AMLF has the option to resellthe paper or hold it until maturity) Since thattime the programrsquos assets have decreased at an

average weekly rate of 11 percent In the weekending April 1 2009 the AMLF held just over$6 billion in assets

On June 25 2009 the authorization of theAMLF was extended through February 1 2010although with additional administrative criteriato ensure the program is used for its intendedpurpose of a temporary liquidity backstop

Commercial Paper Funding Facility Theevents of mid-September 2008 made money mar-ket investors (who prize liquidity) hesitant topurchase assets with maturities longer than asingle day In normal times approximately 5 to10 percent of daily CP issuance is 91-day maturityand represents 20 to 25 percent of all outstandingpaper In mid-September 91-day issuance fellto near zero On Friday September 12 for exam-ple 60 percent of issuance was 1- to 4-day matu-rity by Wednesday September 17 87 percentwas 1- to 4-day maturity On October 7 2008the Federal Reserve announced the creation ofthe CPFF to support longer-maturity paper TheCPFFrsquos structure is similar to the Money MarketInvestor Funding Facility An SPV purchases 3-month corporate unsecured and asset-backedA1P1ndashrated CP using funds provided by theFederal Reserve Bank of New York23 The paperis held to maturity Similar to other CP marketsupport programs the program is linked to theevents of mid-September 2008 The maximumamount an issuer can sell to the CPFF is the maxi-mum amount the issuer had outstanding betweenJanuary 1 and August 31 2008 and the CPFFwill not purchase from issuers who were inactiveprior to its inception The first purchases by theCPFF occurred on October 27 2008 It was origi-nally scheduled to purchase paper through onOctober 30 2009 but was extended throughFebruary 1 2010 in order to ensure the accessof US businesses to short-term funding How -ever the interest rates of the CPFF have becomeincreasingly unattractive to many borrowers

Anderson and Gascon


23 The details are more complex than summarized here Technicallythe facility purchases newly issued paper with maturity of 81 daysor more Pricing also is complex with surcharges of 100 to 300basis points Each participating company must also pay a registra-tion fee to use the CPFF For details see Federal Reserve Bank ofNew York (2009b)

22 Section 13(3) allows the Federal Reserve Banks under certainconditions and with specified approval of the Board of Governorsto lend to almost any borrower via the discounting of assetsSection 13(3) does not permit direct lending rather the fundingis supplied via the borrower discounting assets to the FederalReserve Hence using a SPV as the borrower is convenient

The CPFF has been the most active of theFederal Reserversquos three support programs forthe CP market and has been cited by ChairmanBernanke (2009) and others as a highly success-ful market support activity Hence its history isworthy of closer examination

Figure 11 shows the weekly issuance of 3-month CP (rated A1P1 and A2P2) betweenSeptember 2008 and February 2009 Issuancedecreased sharply during September 2008 butincreased steadily during October During its firsttwo weeks the CPFF purchased the overwhelm-ing majority of all newly issued eligible 3-monthCP One likely reason for such large volume wasthe wish by corporations to lock in year-endfinancing daily data show that issuance jumpedon October 27-29 the first days of purchase by theCPFF For all weeks thereaftermdashuntil the week ofJanuary 28 2009 when the initially purchased

91-day paper maturedmdashrelatively little CP waspurchased by the CPFF The second burst of CPFFactivity occurred the weeks of January 28 andFebruary 4 when paper purchased by the CPFFin October rolled over Later weeks show lightactivity When the CPFF was in full swing it heldover 20 percent of all CP outstanding but fewerand fewer investors continued to roll over theirpaper with the CPFF at the time of this writingthe CPFF currently holds less than 5 percent ofall CP outstanding The reason likely reflects apricing policy designed to urge private sectornot CPFF funding Funding via the CPFF is notinexpensive with pricing set to yield 100 to 300basis points above the overnight index swap rateFurther some former CPFF borrowers have turnedto the Temporary Liquidity Guarantee Program ofthe Federal Deposit Insurance Corporation whichguarantees bank debt at far longer maturities

Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent

CP Purchased by the CPFFNon CPFFCPFF share of total CP outstanding (right axis)

Figure 11

CPFF Share of Purchases and Outstanding

SOURCE FRB H41 Table 1 Federal Reserve Bank of New York

Figure 12 shows some historical perspectivewhich compares side by side weekly issuancein 2006-07 2007-08 and 2008-09 of CP withmaturity greater than 80 days The reduction inCP issuance near year-end is quite pronounced24

Although the period mid-September to mid-October 2008 clearly is unusual issuance appearslargely to have recovered by the time of the CPFFrsquosfirst purchases Was the CPFF necessary Wouldthe market have recovered in the absence of theCPFF Or was the CPFFrsquos presence essential toassure investors that a ldquopurchaser of last resortrdquosimilar to the Federal Reserversquos discount windowwas available to mitigate rollover risk It is tooearly to say as of this writing

Finally we note that the CPFF program hasbeen profitable for the Federal Reserve Accordingto recently issued financial statements (Federal

Reserve Bank of New York 2009a) betweenOctober 14 and December 31 2008 the programhad a net income of $108 billion and as ofDecember 31 2008 the program had experiencedno defaults

CONCLUSION THE FUTURE OFCOMMERCIAL PAPER

The CP market and MMMFs have maturedtogether each complementing the other and todayare the liquid core of the US shadow bankingsystem Money funds intermediate CP into liquidshares that have many of the characteristics ofbank deposits that is the money funds provideinvestorsmdashlarge or small retail or institutionalmdasha liquid high-quality low-risk investment alter-native Simultaneously money funds purchase CP

The CP market was originated by firms seek-ing short-term funds at interest rates and terms

Anderson and Gascon


24 Musto (1997) and Downing and Oliner (2007) provide a discussionabout the year-end effects in the CP market

0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12

Commercial Paper Issuance


more favorable than bank loans The rise of bank-advised multiseller ABCP conduits during the1990s extended the marketrsquos purpose such that itbecame focused on asset securitization and riskdiffusion typically with significant off-balance-sheet support from the nationrsquos largest commercialbanks Today the economic role of conduits issimilar to the role played by banks Assets pur-chased by conduits provide funds to businessessmall and large while conduitsrsquo bank advisersseek to monitor the management and performanceof those assetsrsquo issuers Simultaneously the CPissued by conduits provides to investors a liquidlow-risk asset All of this occurs without the costand fuss of a banking charter capital adequacyrequirements or federal deposit insurance

The rapid growth and large size of the CPmarket sensitizes it to adverse events includingthe bankruptcy of the Penn Central Railroad in1970 and more recently the bankruptcy ofLehman Brothers The sensitivity is twofoldIssuers of secured paper find it increasingly diffi-cult to roll over their paper even at shorter matu-rity and higher cost and MMMFs and ABCPprograms may experience runs The causes andconsequences of these two sensitivities requirefurther research25 Policymakers will also find itnecessary to address if and how the regulationswill need to be implemented in what is nowunderstood to be a systematically importantsector of the US and global economy26 On theother hand in a low-interest-rate environmentbusinesses may prefer to secure long-term financ-ing and shift away from CP To the extent thatfinancial markets currently expect low interestrates to prevail for an extended period volumein the CP market may be attenuated for some time

REFERENCESAcharya Viral V Gale Douglas M and YorulmazerTanju ldquoRollover Risk and Market Freezesrdquo FederalReserve Bank of New York Working paper February2009

Anderson Richard G ldquoBankersrsquo AcceptancesYesterdayrsquos Instrument to Restart Todayrsquos CreditMarketrdquo Federal Reserve Bank of St LouisEconomic Synopses 2009a No 5 January 9httpresearchstlouisfedorgpublicationses09ES0905pdf

Anderson Richard G ldquoBankersrsquo Acceptances andUnconventional Monetary Policy FAQsrdquo FederalReserve Bank of St Louis Economic Synopses2009b No 14 March 18 2009httpresearchstlouisfedorgpublicationses09ES0914pdf

Board of Governors of the Federal Reserve SystemBanking and Monetary Statistics 1941-1970Washington DC Board of Governors 1976httpfraserstlouisfedorgpublicationsbms2

Bernanke Ben S ldquoThe Crisis and the PolicyResponserdquo Stamp Lecture London School ofEconomics January 13 2009 wwwfederalreservegovnewseventsspeechbernanke20090113ahtm

Calomiris Charles W ldquoIs the Discount WindowNecessary A Penn Central Perspectiverdquo FederalReserve Bank of St Louis Review MayJune 199476(3) pp 31-55

Cantor Richard and Rodriques Anthony P ldquoNonbankLenders and Credit Slowdownrdquo in Studies onCauses and Consequences of the 1989-92 CreditSlowdown New York Federal Reserve Bank ofNew York February 1994

Covitz Daniel Liang Nellie and Suarez GustavoldquoThe Evolution of a Financial Crisis Panic in theAsset Backed Commercial Paper Marketrdquo FederalReserve Board Finance and Economics DiscussionSeries 2009-36 August 18 2009 wwwfederalreservegovpubsfeds2009200936indexhtml

25 We refer readers to Acharya Gale and Yorulmazer (2009) forstarting points for the discussion on rollover risk and CovitzLiang and Suarez (2009) on runs of ABCP programs

26 Acharya Gale and Yorulmazer (2009) suggest improving the liqui-dation value of assets and higher capital requirements as possiblesolutions Gatev and Strahanrsquos (2006) results suggest that commer-cial banks should naturally be well positioned to act as liquidityproviders during crises as a ldquoflight to qualityrdquo will boost bankreserves allowing them to meet the demands of their ABCP pro-grams More obvious remedies would be the permanent establish-ment of a CPFF-type backstop

Anderson and Gascon


Downing Chris and Oliner Stephen ldquoThe TermStructure of Commercial Paper Ratesrdquo Journal ofFinancial Economics January 2007 83(1) pp 59-86

Federal Reserve Bank of New York ldquoCommercialPaper Funding Facility LLC Financial Statementsfor the Period October 14 2008 to December 31 2008and Independent Auditors Reportrdquo April 2 2009awwwnewyorkfedorgaboutthefedannualannual08CPFFfinstmt2009pdf

Federal Reserve Bank of New York ldquoCommercialPaper Funding Facility Program Terms andConditionsrdquo (effective June 25 2009b)wwwnewyorkfedorgmarketscpff_termshtml

Fitch Ratings ldquoGlobal Asset-Backed CommercialPaper 2007 Review and 2008 Outlookrdquo StructuredFinance Asset-Backed Special Report January 242008

Fitch Ratings ldquoThe ABCP Paper Trailrdquo May 2008

Fitch Ratings ldquo2009 Outlook for Global ABCPrdquoStructured Finance Asset-Backed Special ReportFebruary 12 2009

Gascon Charles S ldquoFederal Reserve AssetsUnderstanding the Pieces of the Pierdquo FederalReserve Bank of St Louis Economic Synopses2009 No 13 March 10 2009 httpresearchstlouisfedorgpublicationses09ES0913pdf

Gatev Evan and Strahan Philip E ldquoBanksrsquo advan-tage in hedging liquidity risk theory and evidencefrom the commercial paper marketrdquo Journal ofFinance April 2006 62(2) 867-91

Gavin William T ldquoMore Money UnderstandingRecent Changes in the Monetary Baserdquo FederalReserve Bank of St Louis Review MarchApril 200991(2) pp 49-59 httpresearchstlouisfedorgpublicationsreview0903Gavinpdf

Hahn Thomas K ldquoCommercial Paperrdquo in Timothy QCook and Robert K Laroche eds Instruments of theMoney Market Federal Reserve Bank of RichmondSpecial Report 1998 pp 105-27 wwwrichmondfedorgpublicationsresearchspecial_reportsinstruments_of_the_money_marketpdfchapter_09pdf

Henriques Diana B ldquoBuck Broken But Timing MayAffect Redemptionsrdquo New York Times November 262008 wwwnytimescom20081127business27fundhtml_r=1ampscp=1ampsq=Henriques20and20November202720200820and20Buck20brokenampst=cse

Kavanagh Barbara Boemio Thomas R and EdwardsGerald A ldquoAsset-Backed Commercial PaperProgramsrdquo Federal Reserve Bulletin February 199278(2) pp 107-16

Keogh Bryan ldquoAsset-Backed Commercial Paper DropsMost in 2 Monthsrdquo Bloomberg November 8 2007

Mollenkamp Carrick ldquoShake-Up At CitigroupmdashCredit Crunch Commercial-Paper Market Hit byNew Investor Anxietyrdquo Wall Street JournalNovember 5 2007

Moodyrsquos Investor Service ldquoThe Fundamentals ofAsset-Backed Commercial Paperrdquo StructuredFinance Special Report Moodyrsquos Investors ServiceFebruary 3 2003

Moodyrsquos Investor Service ldquoABCP 2008 Year In Reviewand 2009 Outlookrdquo Structured Finance SpecialReport Moodyrsquos Investors Service February 10 2009

Musto David K ldquoPortfolio Disclosures and Year-EndPrice Shiftsrdquo Journal of Finance September 199752(4) pp 1563-88

Post Mitchell A ldquoThe Evolution of the USCommercial Paper Marker Since 1980rdquo FederalReserve Bulletin December 1992 78(12) pp 880-91

Sahn-Bubna Aparajita ldquoCommercial Paper ShowsSome StressmdashBad Mortgages Weigh On Low-ProfileCorner of Short-Term Marketrdquo Wall Street JournalAugust 8 2007

Shen Pu ldquoWhy Has the Nonfinancial CommercialPaper Market Shrunk Recentlyrdquo Federal ReserveBank of Kansas City Economic Review First Quarter2003

Standard and Poorrsquos ldquoThe US Asset-BackedCommercial Paper Market May be Down But Itrsquos NotOutrdquo Standard and Poorrsquos Ratings Direct July 72008

Anderson and Gascon


Stigum Marcia and Crezcenzi Anthony StigumrsquosMoney Market Fourth edition New York McGraw-Hill 2007

United States Department of the Treasury ldquoFrequentlyAsked Questions About Treasuryrsquos TemporaryGuarantee Program for Money Market Fundsrdquo PressRelease HP-1163 September 29 2008

Anderson and Gascon


might sharply worsen the recession In responsethe Treasury and Federal Reserve enacted pro-grams to restore stability These programs focusedon enhancing market liquidity not on removingdefault risk from the market

THE STRUCTURE OF THE COMMERCIAL PAPER MARKET

In its traditional form CP is an unsecuredpromissory note issued by a business (either finan-cial or nonfinancial) for a specific dollar amountand with maturity on a specific date2 Companiesissue CP as a low-cost alternative to bank loansas it is exempt from Securities and ExchangeCommission (SEC) registration3 CP is generally

issued in large denominations of ($100000 ormore) The maturity on CP averages 30 days butmay range up to 270 days Proceeds from CPissuance are used to finance ldquocurrent transac-tionsrdquo including meeting payroll obligations andfunding current assets such as managing receiv-ables or inventories Figure 1 displays the maturitycomposition of CP issued in 2008 that year themajority of CP had a maturity of less than 1 week

Similar to Treasury bills CP is typically issuedat a discount meaning that the buyer pays lessthan face value and receives face value at maturityThe ldquointerestrdquo is equal to the face value minusthe purchase price Although CP is issued at shortmaturities to minimize interest expense manyissuers roll over CP by selling new paper to payoff maturing paper Because of modest credit riskyields on CP are slightly higher than on Treasurybills of similar maturity Large denominations andshort maturities typically limit the CP market tolarge institutional investors such as MMMFs

CP generally is classified in three broad (butoverlapping) categories nonfinancial financialand asset-backed Further CP may be classifiedas being sold with the assistance of a CP dealer(dealer placed) or without (directly placed)Traditional nonfinancial and financial paperrespectively are unsecured short-term debt issuedby highly rated corporations including industrialfirms public utilities bank holding companiesand consumer finance corporations ABCP on theother hand is more complicated The simplestdescription of ABCP is as a form of securitizationAs the name implies it is CP with specific assetsattached In financial industry jargon ABCP isissued by ldquoconduitsrdquo Conduits are structured tobe bankruptcy remote and limited in purpose4

Each conduit includes a special-purpose vehicle(SPV) that is the legal entity at the center of theprogram and a financial adviser (usually a com-mercial or investment bank) that manages the pro-gram and determines the assets to be purchased

Anderson and Gascon


2 The exception being ABCP which is CP with specific assets attachedas collateral We discuss this type of CP in more detail below

3 CP is exempt from SEC registration if the following three criteriaare met (i) the maturity of the paper is less than 270 days (ii) notesmust be of a type not ordinarily purchased by the general publicand (iii) issues must be used to finance ldquocurrent transactionsrdquo(Hahn 1998)

1-4 days$10343969

5-9 days$90416

10-20 days$66224

21-40 days$1491310

41-80 days$61234

80+ days$104847

Figure 1

Commercial Paper Issuance by Maturity2008 (average $ billions)

SOURCE Federal Reserve Board Volume Statistics forCommercial Paper Issuance

4 Bankruptcy remote refers to all participants in a conduit agreeingnot to force the SPV into bankruptcy prior to a year and a day afterissuance of the conduitrsquos most recent CP this ensures redemptionof all CP Limited purpose refers to issuance of CP as its solebusiness





Anderson and Gascon




2002 2006 2007 2008

Consumer Assets



Credit Cards 149 105 131 127










Total (percent) 100 100 100 100






Anderson and Gascon



Seller

Investor

InvestorInvestor

Investor

Investor

Investor

Investor

ABCP Conduit


Seller


Seller

Cas

h

Deb

tA

BC

PA

BC

P

Cas

hC

ash




Figure 2









Anderson and Gascon




Deb

tA

BC

P

Cas

hC

ash


Administrator

Liquidity Providers

Owner

Fees Fees

Fees Dividends


Figure 3










Anderson and Gascon






2001 3365 2806 6170 2059 385 2444 5008 1276 6284 14898

2008 5522 2315 7837 1746 171 1917 6631 1004 7636 17393

Share (percent)

2006 226 188 414 138 26 164 336 86 422 1000

2008 317 133 451 100 10 110 381 58 439 1000


Anderson and Gascon


0

50

100

150

200

250

300

350

1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986

NSA ($ Billions)

0

500

1000

1500

2000

2500

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

NSA ($ Billions)

Figure 4






Anderson and Gascon



Percent $ Billions

1952-1971 1972-1991 1992-present 2008 2008



Foreign Sector 156 46 95 146 2332



Mutual Funds 33 26 57 33 520











Total (percent) 1000 997 1000 1000

Total ($ billions) 133 2629 12344 15995 15995









Anderson and Gascon




0

5

10

15

20

25

30

35

40

45

50

1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972

NSA ($ Billions)


Figure 5












Anderson and Gascon















Anderson and Gascon










Anderson and Gascon





Anderson and Gascon




0

100

200

300

400

500

600

1958 1964 1970 1976 1982 1988 1994 2000 2006

$ Billions


Figure 6











Anderson and Gascon





Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)


Figure 7









Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon






Anderson and Gascon




2002 2006 2007 2008

Consumer Assets



Credit Cards 149 105 131 127










Total (percent) 100 100 100 100






Anderson and Gascon



Seller

Investor

InvestorInvestor

Investor

Investor

Investor

Investor

ABCP Conduit


Seller


Seller

Cas

h

Deb

tA

BC

PA

BC

P

Cas

hC

ash




Figure 2









Anderson and Gascon




Deb

tA

BC

P

Cas

hC

ash


Administrator

Liquidity Providers

Owner

Fees Fees

Fees Dividends


Figure 3










Anderson and Gascon






2001 3365 2806 6170 2059 385 2444 5008 1276 6284 14898

2008 5522 2315 7837 1746 171 1917 6631 1004 7636 17393

Share (percent)

2006 226 188 414 138 26 164 336 86 422 1000

2008 317 133 451 100 10 110 381 58 439 1000


Anderson and Gascon


0

50

100

150

200

250

300

350

1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986

NSA ($ Billions)

0

500

1000

1500

2000

2500

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

NSA ($ Billions)

Figure 4






Anderson and Gascon



Percent $ Billions

1952-1971 1972-1991 1992-present 2008 2008



Foreign Sector 156 46 95 146 2332



Mutual Funds 33 26 57 33 520











Total (percent) 1000 997 1000 1000

Total ($ billions) 133 2629 12344 15995 15995









Anderson and Gascon




0

5

10

15

20

25

30

35

40

45

50

1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972

NSA ($ Billions)


Figure 5












Anderson and Gascon















Anderson and Gascon










Anderson and Gascon





Anderson and Gascon




0

100

200

300

400

500

600

1958 1964 1970 1976 1982 1988 1994 2000 2006

$ Billions


Figure 6











Anderson and Gascon





Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)


Figure 7









Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon





Anderson and Gascon



Seller

Investor

InvestorInvestor

Investor

Investor

Investor

Investor

ABCP Conduit


Seller


Seller

Cas

h

Deb

tA

BC

PA

BC

P

Cas

hC

ash




Figure 2









Anderson and Gascon




Deb

tA

BC

P

Cas

hC

ash


Administrator

Liquidity Providers

Owner

Fees Fees

Fees Dividends


Figure 3










Anderson and Gascon






2001 3365 2806 6170 2059 385 2444 5008 1276 6284 14898

2008 5522 2315 7837 1746 171 1917 6631 1004 7636 17393

Share (percent)

2006 226 188 414 138 26 164 336 86 422 1000

2008 317 133 451 100 10 110 381 58 439 1000


Anderson and Gascon


0

50

100

150

200

250

300

350

1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986

NSA ($ Billions)

0

500

1000

1500

2000

2500

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

NSA ($ Billions)

Figure 4






Anderson and Gascon



Percent $ Billions

1952-1971 1972-1991 1992-present 2008 2008



Foreign Sector 156 46 95 146 2332



Mutual Funds 33 26 57 33 520











Total (percent) 1000 997 1000 1000

Total ($ billions) 133 2629 12344 15995 15995









Anderson and Gascon




0

5

10

15

20

25

30

35

40

45

50

1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972

NSA ($ Billions)


Figure 5












Anderson and Gascon















Anderson and Gascon










Anderson and Gascon





Anderson and Gascon




0

100

200

300

400

500

600

1958 1964 1970 1976 1982 1988 1994 2000 2006

$ Billions


Figure 6











Anderson and Gascon





Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)


Figure 7









Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon








Anderson and Gascon




Deb

tA

BC

P

Cas

hC

ash


Administrator

Liquidity Providers

Owner

Fees Fees

Fees Dividends


Figure 3










Anderson and Gascon






2001 3365 2806 6170 2059 385 2444 5008 1276 6284 14898

2008 5522 2315 7837 1746 171 1917 6631 1004 7636 17393

Share (percent)

2006 226 188 414 138 26 164 336 86 422 1000

2008 317 133 451 100 10 110 381 58 439 1000


Anderson and Gascon


0

50

100

150

200

250

300

350

1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986

NSA ($ Billions)

0

500

1000

1500

2000

2500

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

NSA ($ Billions)

Figure 4






Anderson and Gascon



Percent $ Billions

1952-1971 1972-1991 1992-present 2008 2008



Foreign Sector 156 46 95 146 2332



Mutual Funds 33 26 57 33 520











Total (percent) 1000 997 1000 1000

Total ($ billions) 133 2629 12344 15995 15995









Anderson and Gascon




0

5

10

15

20

25

30

35

40

45

50

1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972

NSA ($ Billions)


Figure 5












Anderson and Gascon















Anderson and Gascon










Anderson and Gascon





Anderson and Gascon




0

100

200

300

400

500

600

1958 1964 1970 1976 1982 1988 1994 2000 2006

$ Billions


Figure 6











Anderson and Gascon





Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)


Figure 7









Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon









Anderson and Gascon






2001 3365 2806 6170 2059 385 2444 5008 1276 6284 14898

2008 5522 2315 7837 1746 171 1917 6631 1004 7636 17393

Share (percent)

2006 226 188 414 138 26 164 336 86 422 1000

2008 317 133 451 100 10 110 381 58 439 1000


Anderson and Gascon


0

50

100

150

200

250

300

350

1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986

NSA ($ Billions)

0

500

1000

1500

2000

2500

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

NSA ($ Billions)

Figure 4






Anderson and Gascon



Percent $ Billions

1952-1971 1972-1991 1992-present 2008 2008



Foreign Sector 156 46 95 146 2332



Mutual Funds 33 26 57 33 520











Total (percent) 1000 997 1000 1000

Total ($ billions) 133 2629 12344 15995 15995









Anderson and Gascon




0

5

10

15

20

25

30

35

40

45

50

1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972

NSA ($ Billions)


Figure 5












Anderson and Gascon















Anderson and Gascon










Anderson and Gascon





Anderson and Gascon




0

100

200

300

400

500

600

1958 1964 1970 1976 1982 1988 1994 2000 2006

$ Billions


Figure 6











Anderson and Gascon





Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)


Figure 7









Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon


Anderson and Gascon


0

50

100

150

200

250

300

350

1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986

NSA ($ Billions)

0

500

1000

1500

2000

2500

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

NSA ($ Billions)

Figure 4






Anderson and Gascon



Percent $ Billions

1952-1971 1972-1991 1992-present 2008 2008



Foreign Sector 156 46 95 146 2332



Mutual Funds 33 26 57 33 520











Total (percent) 1000 997 1000 1000

Total ($ billions) 133 2629 12344 15995 15995









Anderson and Gascon




0

5

10

15

20

25

30

35

40

45

50

1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972

NSA ($ Billions)


Figure 5












Anderson and Gascon















Anderson and Gascon










Anderson and Gascon





Anderson and Gascon




0

100

200

300

400

500

600

1958 1964 1970 1976 1982 1988 1994 2000 2006

$ Billions


Figure 6











Anderson and Gascon





Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)


Figure 7









Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon





Anderson and Gascon



Percent $ Billions

1952-1971 1972-1991 1992-present 2008 2008



Foreign Sector 156 46 95 146 2332



Mutual Funds 33 26 57 33 520











Total (percent) 1000 997 1000 1000

Total ($ billions) 133 2629 12344 15995 15995









Anderson and Gascon




0

5

10

15

20

25

30

35

40

45

50

1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972

NSA ($ Billions)


Figure 5












Anderson and Gascon















Anderson and Gascon










Anderson and Gascon





Anderson and Gascon




0

100

200

300

400

500

600

1958 1964 1970 1976 1982 1988 1994 2000 2006

$ Billions


Figure 6











Anderson and Gascon





Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)


Figure 7









Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon







Anderson and Gascon




0

5

10

15

20

25

30

35

40

45

50

1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972

NSA ($ Billions)


Figure 5












Anderson and Gascon















Anderson and Gascon










Anderson and Gascon





Anderson and Gascon




0

100

200

300

400

500

600

1958 1964 1970 1976 1982 1988 1994 2000 2006

$ Billions


Figure 6











Anderson and Gascon





Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)


Figure 7









Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon











Anderson and Gascon















Anderson and Gascon










Anderson and Gascon





Anderson and Gascon




0

100

200

300

400

500

600

1958 1964 1970 1976 1982 1988 1994 2000 2006

$ Billions


Figure 6











Anderson and Gascon





Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)


Figure 7









Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon














Anderson and Gascon










Anderson and Gascon





Anderson and Gascon




0

100

200

300

400

500

600

1958 1964 1970 1976 1982 1988 1994 2000 2006

$ Billions


Figure 6











Anderson and Gascon





Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)


Figure 7









Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon









Anderson and Gascon





Anderson and Gascon




0

100

200

300

400

500

600

1958 1964 1970 1976 1982 1988 1994 2000 2006

$ Billions


Figure 6











Anderson and Gascon





Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)


Figure 7









Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon





Anderson and Gascon




0

100

200

300

400

500

600

1958 1964 1970 1976 1982 1988 1994 2000 2006

$ Billions


Figure 6











Anderson and Gascon





Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)


Figure 7









Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon










Anderson and Gascon





Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)


Figure 7









Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon





Anderson and Gascon


0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

80

90

100NSA ($ Billions)


Figure 7









Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon






Anderson and Gascon


0

10

20

30

40

50

60

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008



Figure 8







Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon





Anderson and Gascon



000

100

200

300

400

500

600

700

800


Rate (percent)


Figure 9








Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon







Anderson and Gascon


000

050

100

150

200

250


$ Trillions


Figure 10











Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon









Anderson and Gascon







Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon





Anderson and Gascon


0

50

100

150

200

250

93

2008

917

200

8

101

200

8

101

520

08

102

920

08

111

220

08

112

620

08

121

020

08

122

420

08

17

2009

121

200

9

24

2009

218

200

9

34

2009

318

200

9

41

2009

415

200

9

429

200

9

513

200

9

527

200

9

610

200

9

624

200

9

78

2009

722

200

9

85

2009

819

200

9

92

2009

$ Billions

0

5

10

15

20

25

Percent


Figure 11










Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon









Anderson and Gascon



0

20

40

60

80

100

120

140

160

180

200

93

2008

910

200

8

917

200

8

924

200

8

101

200

8

108

200

8

101

520

08

102

220

08

102

920

08

115

200

8

111

220

08

111

920

08

112

620

08

123

200

8

121

020

08

121

720

08

122

420

08

123

120

08

17

2009

114

200

9

121

200

9

128

200

9

24

2009

211

200

9

218

200

9

225

200

9

34

2009

311

200

9

318

200

9

325

200

9

41

2009

48

2009

415

200

9

422

200

9

429

200

9

56

2009

$ Billions

2006-20072007-20082008-2009

Year-end

Figure 12















Anderson and Gascon























Anderson and Gascon




Anderson and Gascon














Anderson and Gascon























Anderson and Gascon




Anderson and Gascon























Anderson and Gascon




Anderson and Gascon




Anderson and Gascon


Documents

The Commercial Paper Market, The Fed, And the 2007-2009 Financial