Bloomberg features "Fed Created Conflicts in Improvising Financial System Rescue". It says, "The solution [Federated's Debbie] Cunningham helped craft on Sept. 20, 2008, was a bailout for money market funds, which were created as safe investments that could be easily cashed out. The Fed put the facility into effect two days later. At its peak in October 2008, it provided $152 billion to stem a customer run sparked by the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc. This week's disclosures of data from the Fed's rescue efforts during the 2007-2008 financial crisis show how the central bank employed companies to help design or run programs they could use to their benefit.... In compliance with the Dodd-Frank financial overhaul law, the Fed on Dec. 1 identified the institutions that used $3.3 trillion of improvised rescue programs. The 21,000 transactions in 11 initiatives included the money-market plan Cunningham helped devise, known as the AMLF, short for its 10-word formal name, the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility. In its scramble to keep the economy from collapsing, the Fed also created the Commercial Paper Funding Facility, or CPFF, which tried to ensure that banks and industrial companies had the short-term loans they needed to fund everyday operations. General Electric Co., the biggest issuer of commercial paper, met with Treasury and Fed officials in the days before they created the CPFF." Bloomberg quotes our Peter Crane, "The AMLF was the single most successful government intervention during the financial crisis. In a crisis when you have esoteric corners of the market involved, you have no choice but to go to the experts, and the experts will be self-interested players."
