Tier 1 issuers accept a deeper discount to access the Fedfacility; as of last week, the funding facility was accepting paperat a discount rate of 1.21%, while Tier 1 nonfinancial paper in theregular market was going at a discount of 21 bps and Tier 1financial paper at 51 bps. But the funding facility's pricing looksattractive to Tier 2 issuers; AFP calculates that Tier 2 companiesare paying 2.12% more to issue 90-day paper than Tier 1companies.

If Tier 2 companies, such as FedEx, Kraft and Safeway, canaccess the commercial paper market, that takes some pressure offbanks, says Kalish. “Every dollar they can't fund themselves in thecommercial paper market, they're turning around and funding withtheir banks,” he says. “That's one more dollar banks don't have tolend elsewhere.”

Still, the commercial paper market is showing some signs oflife. Outstandings totaled $1.48 trillion in March, still well offthe market's 2007 peak of $2.2 trillion. But the CPFF's holdingsare off almost a third from the peak of $349.9 billion in lateJanuary, suggesting more issuers are able to stand on their own. Inthe final week of March, the facility held $240.8 billion, or about16% of the total paper outstanding.