1970 Commercial Paper Market Liquidity Crisis (U.S. Historical)

Kaleb Nygaard ()
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Kaleb Nygaard: YPFS, Yale School of Management, https://elischolar.library.yale.edu/journal-of-financial-crises/

Journal of Financial Crises, 2020, vol. 2, issue 3, 101-115

Abstract: Penn Central Transportation Company (Penn Central), the resulting railroad company of the late 1960s merger of Pennsylvania Railroad and New York Central Railroad, filed for bankruptcy on June 21, 1970. The bankruptcy came in the middle of the 1969-70 recession and sparked a sharp downturn in the commercial paper market. The Federal Reserve did not intervene directly in the commercial paper market but rather increased funding options available to banks via the discount window and an amendment to Regulation Q. The banks then provided funds to corporations unable to acquire them from the commercial paper market. The liquidity crisis abated within a few weeks.

Keywords: Penn Central; commercial paper; Federal Reserve; Regulation Q; discount window; liquidity (search for similar items in EconPapers)
JEL-codes: G01 G28 (search for similar items in EconPapers)
Date: 2020
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