During 2007 and 2008, the market for which short-term investment stopped functioning and had to be rescued by the Federal Reserve?

Question

Quizplus · Accepted Answer

During 2007 and 2008, the commercial paper market simply stopped functioning. Investors no longer trusted the IOUs of even the best companies. Companies that had relied on commercial paper to fund short-term cash needs had to turn to the banks for borrowing. Eventually, the Federal Reserve entered the market to buy and sell commercial paper for its own portfolio. It rescued the market, and the commercial paper market is now standing on its own two feet without the Fed's help.

During 2007 and 2008, the Market for Which Short-Term Investment