Characteristics of Participants in the Commercial Paper Funding Facility

The Commercial Paper Funding Facility (CPFF) bought commercial paper from highly rated issuers of U.S. dollar commercial paper during the financial crisis of 2008 to 2009. This is the only study to analyze the accounting characteristics of both financial and non-financial firms participating and not participating in this $738 billion Federal Reserve program. In logistic regressions, CPFF participants and non-participants differed little in solvency or liquidity ratios. Thus, there is little evidence of adverse selection by financial firms. Nevertheless, CPFF participants were significantly more likely to receive capital injections from the TARP bailout, to pose greater systemic risks and be based in North America. JEL Classification: G01, G18, G2, G28 Keywords: ABCP, Asset Backed Commercial Paper, Bailout, Banks, Capital Purchase Program (CPP), Commercial Paper, Commercial Paper Funding Facility (CPFF), Emergency Lending, Federal Reserve, Multinational Firms, Section 13(3), Troubled Asset Relief Program (TARP), U.S. Treasury, Unsecured Commercial Paper, Unusual and Exigent Circumstances
I. Introduction The Federal Reserve, through its Commercial Paper Funding Facility (CPFF), made aggregate purchases of commercial paper of $738.3 billion between October 27, 2008, and February 1, 2010. This [...]