I have published research on commercial paper, which makes me wonder why did the Fed intervene in the commercial paper market? The interest rate on this paper was less than 4%. What is the big deal? That paper lots of times runs 5-6%. There had been some runoff (decline) in the amount outstanding, but nothing out of the ordinary for a recession if you look back at the 2000 decline.

One possible answer is that there were a number of overextended industrial or retail companies that could not issue paper. The market for low-rated paper has always been very thin. A downgrade on commercial paper essentially puts the company out of the market. The Fed may have wanted to save some weak big-name companies, being fearful that a bankruptcy at this time of GM or GE or Ford would be a bad thing.

A second answer is that commercial paper usually is issued with banks providing either lines of credit or a backup letter of credit. This is like credit insurance, since the bank guarantees the issue. That enables higher-risk companies to issue commercial paper. But it also places the bank on the hook if the company cannot redeem the issue when it matures. The Fed is possibly bailing out these banks that have made these guarantees.