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The Federal Reserve announced the creation of a new funding facility which will provide senior secured funding to a series of special purpose vehicles to facilitate an industry-supported private-sector initiative to finance the purchase of eligible assets from eligible investors.
The Fed could lend as much as $540 billion to five special purpose vehicles set up to buy certificates of deposit and commercial paper from highly rated institutions, Fed officials said. The Fed will provide senior secured funding of up to 90 percent to buy the assets from
“The short-term debt markets have been under considerable strain in recent weeks”, the Fed notes. “The MMIFF should improve the liquidity position of money market investors, thus increasing their ability to meet any further redemption requests and their willingness to invest in money market instruments.”
Eligible assets will include U.S. dollar-denominated certificates of deposit and commercial paper issued by highly rated financial institutions and having remaining maturities of 90 days or less. Eligible investors will include