Commencing October 27, 2008, the Federal Reserve Board will establish a commercial paper (CP) funding facility to help provide liquidity to the strained ~$1.7 trillion CP market. This facility, together with a program by the U.S. Treasury to make investments in senior preferred stock and common stock warrants in qualifying financial institutions, and the FDIC’s temporary liquidity guarantee program, is part of a three-pronged effort by the government intended to instill greater confidence in and free up the credit markets.

Using this new CP funding facility in the form of a special purpose vehicle (SPV), the Federal Reserve Bank of New York will finance the SPV’s purchase of three-month U.S. dollar denominated CP directly from eligible issuers. The Federal Reserve has stated that the SPV will hold the CP until maturity, using the proceeds from maturing CP and other assets of the SPV to repay its loan from the Federal Reserve Bank of New York.

Eligible CP includes both unsecured and asset-backed, and must be rated at least A-1/P-1/F1 by a major nationally recognized statistical rating organization. Purchases by the SPV will be priced at the then-current three-month overnight index swap rate plus a fixed spread of 300 basis points (for asset-backed CP) or 100 basis points (for unsecured CP). Purchases of CP that is not assetbacked will require an additional surcharge of 100 basis points, payable by the issuer of such CP unless such CP is secured to the satisfaction of the Federal Reserve Bank of New York.

The SPV will not at any time own CP from any one issuer in excess of “the greatest amount of U.S. dollar denominated [CP] the issuer had outstanding on any day between January 1 and August 31, 2008,” and will not purchase additional CP from an issuer whose total CP outstanding to all investors other than the SPV exceeds such amount. Unless extended, purchases under the CP funding facility will end on April 30, 2009.

Sales of CP will be required to be made through primary dealers. Issuers of CP must register with the new commercial paper funding facility in order to sell CP to the SPV. The registration period will begin on Monday, October 20, 2008 (registration materials, including wire instructions and a registration form, will be available beginning October 20 at

http://www.newyorkfed.org/markets/cpff.html).

A 10 basis point facility fee must be paid upon registration.

To access the SPV on October 27, 2008, an issuer of CP must register no later than Thursday, October 23, 2008. Thereafter, CP issuers that have not registered will be required to register two business days in advance of accessing the SPV.

The issues attendant to the CP program cut across a number of legal disciplines, including financial institution regulation, corporate, government contracts, bankruptcy, real estate, and litigation. Hogan & Hartson has assembled a team of lawyers in these and other disciplines who are available to provide guidance on the CP and other Troubled Assets Relief Program (TARP) initiatives.