Liquidity Quotes

[T]he ABCP market was built on a fatal flaw: a significant mismatch between the duration of the underlying assets (long-term) and the duration of the paper itself (short-term). While this structure is not unusual -- banks use it all the time -- the crucial difference is that banks have a strong liquidity provider in the event of a problem: the Bank of Canada. The trusts, however, were left in limbo.

So why didn't ABCP investors -- at least the large institutional investors -- have a better grasp of the uncertain nature of market disruption triggers as defined under Canadian-style liquidity? Probably because the contracts were not available for review to investors wishing to purchase ABCP -- yet another example of the lack of transparency surrounding the distribution and sale of this product.

Oil may run out, liquidity may dry up, but as long as ink flows freely, the next chapter of Life will continue to be written.