To: MulhollandDrive who wrote (180944 ) 2/1/2009 1:55:03 PM From: tejek Respond to Commercial Paper Tally Plunges; No Worry The past week's decline relates to one factor in particular: Many financial companies have found other sources of funding, partly to lengthen the terms of their borrowing. In particular, banks have issued bonds backed by the FDIC's temporary guarantee loan facility (TGLF); for example, Citigroup (C - commentary - Cramer's Take) last week issued $12 billion of FDIC-backed securities; General Electric (GE - commentary - Cramer's Take) has issued $20.9 billion; JPMorgan Chase (JPM - commentary - Cramer's Take)$17.9 billion; Bank of America (BAC - commentary - Cramer's Take) $19.9 billion, Bloomberg data show. Banks that raise capital through the FDIC's program can cut their short-term borrowing, a desirable goal in the current environment where excessive reliance upon short-term funding is extremely risky, as a few large firms have found out. The commercial paper market should be expected to continue shrinking in the near term, owing to the maturation on Friday of 90-day commercial paper held by the Fed, said to be about $250 billion. Many issuers have been able to either term-out their debts or gain funding from the capital markets, where rates have fallen below the cost of issuing commerical paper to the Fed. Decreases are likely also because of the weak U.S. economy, which reduces the need for working capital, money normally used for the production of goods and services, now in decline.
