The Tuesday issue of The New York Times is full of alarming economic news, but nothing more so than the announcement that the Federal Reserve is putting together yet another radical plan to goose credit markets back into life.
In "Fed Considers Plan to Buy Companies' Unsecured Debt," New York Times reporters Edmund L. Andrews and Michael M. Grynbaum detail the latest Fed scheme to fix the economy. The Fed is now considering becoming a major player in the provision of short-term lending to American businesses, by directly entering into the market for "commercial paper."
Commercial paper -- big loans with very short repayment periods -- has been in short supply lately. Everyone from California to General Electric has been running into problems raising the capital for daily operations. The decision by the Fed to even consider lending directly to businesses on such a huge scale is a dire sign of how bad Bernanke and company believe things currently are.
I can't be the only observer to find this sentence, coming rather late in a piece full of distressing information, unsettling.
But the possibility of propping up the vast market for commercial paper could represent an undertaking even broader than the Treasury Department’s plan to buy as much as $700 billion in mortgage-backed securities.