Credit Cards, Commercial Paper, and Weird Old Uncles

If 18 months ago you would have said that the commercial paper market would be frozen up the Wall Street bigwigs would have laughed at you, but with the common sense of a construction worker you woulda seen it coming a mile away. Commercial paper just means corporate bonds, just means I am going to go to sleep now, to most people. But everyone understands what's going on because it happens to most of us in our daily lives. Let's say you want to build a garage, which you put on your MasterCard, which you pay off with Visa, and pay that off with Discover card and on and on we go. And we all know where this goes, crashing down hard. But now let's say you have a really rich weird old uncle who has more credit cards than you can max out in your lifetime. Now you're wicked weird old uncle will let you use all of his cards, but doesn't tell you that for each card you burn up you burn a few cents off of the credit limit of the cards that remain. So what do you do you spend like mad and madder until you find that all the credit cards have a max spending limit of only one penny and you can't buy the damn thing. Well now you know everything streetwise guys know about the commercial paper market. You also know where uncle FEDs Commercial Paper Funding Facility is going. Bloomsburg puts a soft touch on this one.

General Electric Co., the biggest U.S. issuer of commercial paper, plans to use the Federal Reserve's new short-term funding facility, throwing its weight behind the central bank's efforts to unlock the credit markets.

GE and its General Electric Capital Corp. finance arm registered as users of the Fed's Commercial Paper Funding Facility, spokesman Russell Wilkerson said yesterday in a telephone interview. The company hasn't set an amount that it plans to borrow and will base that decision on commercial-paper buyers' need for liquidity, he said.

``This is a way for us to demonstrate our support for what the Fed is doing, which is providing all-around liquidity,'' Wilkerson said.

Does the sign on my fore head read STUPID? This is the only way you can stay in business Russell.

The Fed is seeking to stem the credit-market seizure and revive demand for commercial paper, short-term debt that companies use to finance their day-to-day operations, by offering to buy 90-day debt of top-rated companies. By selling paper to the Fed, Fairfield, Connecticut-based GE may ease any stigma for other potential borrowers in the program and boost liquidity in the market by encouraging investors to buy debt of lower-rated companies.

The Fed is seeking to extend the rollover, Ponzi finance scheme that has long the sense passed its Minsky moment. Painful as it would be in the short-term and we would all be better off if the Fed would let it crash, then follow it into its burning ashes.

You don't give a rat rump about the stigma of potential borrowers, the only stigma you're trying ease is your own.

``There is a role for us and other large issuers to play here in demonstrating that this action is good for the market and very important for the buyers of GE paper as it provides a secondary market,'' Wilkerson said.

The role that you and other large issuers played is what put us us here.

``We are encouraged that many issuers have already registered in the program because that provides a signal to investors of greater liquidity support to this key financing market,'' said Andrew Williams, a Fed spokesman in New York.

While you make it sound as if they are registering for classes, but they are really registering for life support!

``To ensure access and operability and to demonstrate our support for the Fed's action, we plan to test the facility,'' GE said in an e-mail to investors yesterday. ``We believe the CPFF will strengthen confidence in the prime commercial paper market and encourage more term buying.''

Which all sounds very bland and proper I'm sure, but remember that weird old uncle of yours and what happened to the credit cards that you haven't spent after each one day he just spent, well now you know what happens to each of your dollars for every piece of junk paper the Fed buys from these crappy corporations, or should I say issuer?