Despite our provision of liquidity to banks and broker-dealers, a number of critical nonbank financial markets – such as the commercial paper market and the market for asset-backed securities – deteriorated significantly. Under normal circumstances, these markets are important sources of credit for American businesses and their customers.
Thus, we developed a second set of policy tools to provide liquidity directly to borrowers and investors in key credit markets. Notably, we have introduced facilities to purchase highly rated commercial paper at a term of three months and to provide backup liquidity for money market mutual funds.