Fed Unveils Plan to Buy Commercial Paper

Updated from 7:22 a.m. EDT

The Federal Reserve on Monday announced a new mechanism through which the government can buy massive amounts of unsecured short-term debt in an effort to unclog credit markets in the U.S.

The Fed said the commercial paper funding facility will buy three-month unsecured and asset-backed commercial paper directly from eligible issuers, including nonfinancial businesses, as well as commercial banks and investment firms. Many companies rely on the short-term financing mechanism to finance their day-to-day operations.

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