CNN Spin: Business loan bailout GOOD?!!!

NEW YORK (CNNMoney.com) -- The Federal Reserve announced a new program to help the battered market for short-term business loans - taking its closest step yet to lending directly to businesses.

The program addresses commercial paper, a form of short-term funding that is crucial to many businesses operations.

In the past month, the amount of money outstanding in commercial paper loans has fallen 11% to $1.6 trillion on Oct. 1 from $1.82 trillion on Sept. 10.

Much of the commercial paper outstanding at the start of the credit crisis is now coming up for renewal. As a result, fears have grown that the market could drop even more sharply without some drastic improvement in the market.

Under the program announced Tuesday morning, the Fed will purchase three-month unsecured and asset-backed commercial paper directly from eligible issuers. The program is slated to expire in April 2009 and will have financial support from taxpayers.

"The Treasury believes this facility is necessary to prevent substantial disruptions to the financial markets and the economy and will make a special deposit at the Federal Reserve Bank of New York in support of this facility," said the Fed's statement.

The new program comes as the Treasury Department scrambles to put in place a $700 billion bailout of the financial system enacted on Friday. Under that program, the Treasury is expected to purchase troubled assets from banks and financial institutions in an effort to spur more lending.

First Published: October 7, 2008: 9:19 AM ET
http://money.cnn.com/2008...