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The commercial paper market: Who's minding the shop?
- Article from:
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Regional Economist
- Article date:
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April 1, 1998
- Author:
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;
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Copyright informationCopyright Federal Reserve Bank of St. Louis Apr 1998. Provided by ProQuest LLC. (Hide copyright information)
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On Jan. 31, 1997, Mercury Finance Co.-a major player in the automobile lending business-surprised financial markets by defaulting on $17 million in commercial paper. By the end of February, the amount in default had ballooned to $315 million, representing 60 percent of Mercury's outstanding commercial paper and 30 percent of its outstanding debt. As the saga unfolded, some financial market observers expressed concern that Mercury's default would send shock waves throughout financial markets, perhaps on the scale of the $82 million commercial paper default by Penn Central Railroad some 27 years earlier.
Despite the corporate sector's heavy reliance on commercial paper as a funding source, ...