Just in time. That's what a lot of people feel. Put another way: Whew! The credit crisis had progressed to the danger point: companies were having nerve-wracking difficulty issuing commercial paper, threatening to really slow some bigger companies. The economic rubber was starting to hit the road. The smell of smoke was not lost on the Fed, which has taken the stunning step of announcing yet another credit facility, this one to buy up commercial paper and keep the wheels of normal business turning. Here's the release.  

This is an unprecedented intervention. Companies will reportedly be able to sell three-month commercial paper to the Fed up to the average amount they had outstanding in August, Bloomberg reports. There is no ceiling on the size of the program, though the Fed no doubt is betting that not every single issuer will participate. The facility means that the Fed essentially will be loaning directly to companies. In some cases, this will basically be done with unsecured debt, meaning there is no specific collateral in play. That will cost issuers a fee, however.  

The announcement had a huge impact immediately, as short-term Treasury rates immediately shot up. This is yet another highly interventionist move by the government, which is obviously bent now on bailing out the whole economy.

This begs the question: Are we out of the danger zone? That's not clear, unfortunately. After creating unprecedented bailouts for banks--and now other companies--will municipalities somehow be next? Arnold Schwarzenegger has told federal regulators that he may have no choice but to seek federal assistance for money rather soon. California raises funds every year via "revenue anticipation notes" that provides short-term liquidity pending the arrival of hard tax revenues in the spring. But the markets likely aren't going to cooperate, leaving the state in a lurch. Other states and cities are also under pressure, including New York, New Jersey, Florida and Nevada.

Some bond issues have been scuttled. Massachusetts has twice postponed a $750 million offering, rather than pay sky-high interest rates. It faces significant payments to local governments and retirees at the end of the month. It may also be forced to borrow from the feds. Of course, if every state did this, it would get expensive, fast.

I feel sorry for the small business owners of America. No one is going to be extending special federal loans to them to see them through this crisis. They may be the odd man out in this whole mess. - Jim