Credit Crunch Worse? Fed Solution??

I'm not sure that I like this.

The Federal Reserve Board on Tuesday announced the creation of the Commercial Paper Funding Facility (CPFF), a facility that will complement the Federal Reserve's existing credit facilities to help provide liquidity to term funding markets. The CPFF will provide a liquidity backstop to U.S. issuers of commercial paper through a special purpose vehicle (SPV) that will purchase three-month unsecured and asset-backed commercial paper directly from eligible issuers

My hunch is that the deaths of Lehman, Goldman, and Bear are the proximate cause of the lockup of the CP market. That, and utilization of cash by various banks to pick up the pieces of those firms (which means there is less free cash sitting around.)

But that move also puts the Fed on the hook for some exposure.

So how deep IS the Mariana Trench of the credit lockup?

HT: Calculated Risk