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

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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.

Suggested Citation

  • Nygaard, Kaleb, 2020. "1970 Commercial Paper Market Liquidity Crisis (U.S. Historical)," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 2(3), pages 101-115, April.
    • Handle: RePEc:ysm:ypfsfc:2333
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    File URL: https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=1108&context=journal-of-financial-crises
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    Keywords

    Penn Central; commercial paper; Federal Reserve; Regulation Q; discount window; liquidity;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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