Ross Ramsey, the managing editor at The Texas Tribune, writes a column for The Tribune.

Expanded coverage of Texas is produced by The Texas Tribune, a nonprofit news organization. To join the conversation about this article, go to texastribune.org.

Texas is a lock for Republicans at the statewide level, from the president on down.

It’s hard to find anyone to even talk about the viability of Democrats at the top of the ballot here. They haven’t won a statewide election since 1994. Most of our children — even the ones with jobs and houses of their own — are too young to remember the last time a Democrat won a presidential race here. (It was Jimmy Carter, in 1976, who beat Gerald Ford by just over three percentage points.) The people born that year are in their mid-30s.

So color the state red and stop talking about the electoral map. Talk instead about the financial primary.

Texas is hugely important in that one, and the list of visitors for this season — both the recent ones and those just ahead — includes most of the Republican presidential candidates and the president himself. Senator Mitch McConnell, the Republican minority leader, made a stop in San Antonio, and he wasn’t there for the puffy tacos. Tim Kaine of Virginia, a Democrat who’s running for Senate in another state more than a thousand miles away, has Texas on the list of places where he’ll drag the sack. Speaker John A. Boehner is on the list, presumably to take some of the load off the rich donors in Ohio.

Texas is not alone in this — what do you think Rick Perry was doing in San Francisco earlier this year? The color spectrum there runs from Democratic Blue to Political Green. He might not get any votes in the primary there, but the financial map isn’t the same as the electoral map. The money is in the big states, like you’d expect: California, New York, Texas, Florida and Illinois.

In the 2008 election cycle, presidential candidates raised $1.33 billion nationwide, according to the Federal Election Commission. Of that, $75.4 million came from Texas, and it was only the second presidential election cycle in 30 years without someone from Texas named Bush on the national ticket.

The numbers are smaller so far this year — it’s early — but this crop of presidential aspirants has raised $66.9 million nationally, $3.9 million of it in Texas.

That’s only a slice of the pie. Those are the amounts given to candidates directly and don’t include contributions to political action committees, Super PACs and other political organizations. The Center for Responsive Politics, which tracks campaign finance, reports that Texans gave $195.4 million to federal candidates and PACs combined during the 2008 election cycle. In the current round, they’ve given $38.1 million.

By the center’s accounting, federal candidates have raised about 10 percent of their money in Texas during the current election season. The state also has a large number of really wealthy people, the ones who can write large checks to Super PACs and other political outfits that don’t have limits on what contributors can give.

The voters aren’t tuned in to most races. Some have a passing or early interest in the presidential race, but it remains a sideshow for normal people, who will pay attention as the ads start and the primaries come closer and it’s time to make a decision.

The pundits are talking about electoral maps and who needs to win in Iowa, South Carolina and Nevada.

That’s on the candidates’ radar as well. But their focus is really on money. Without money, there can be no campaign — certainly not a major one, with its need for expensive travel and advertising and polling and voter contact. Especially advertising.

A national campaign — or a big expensive campaign in this state or that — can’t make it without money from Texas. Ten percent is a big number, and if candidates can raise it by eating a couple of bacon-wrapped shrimp at a mansion in Houston or Dallas every month or so, that’s time well spent.

They can worry about voters later.

rramsey@texastribune.org

Students pose outside Olympias Piety Hill School in 1903with teacher Mary Giese. In those early days of public education, leaders were more concerned about teaching morality and good citizenship than job skills.

When passed by Congress in 2001, the No Child Left Behind Act aimed to improve student performance and teacher accountability.

But more than a decade after it was approved, critics say change is needed because successful schools are increasingly being labeled as failures, and the emphasis on testing narrows school curriculum.

Educators and lawmakers say a revamp of the federal education policy is needed immediately.

The action is especially necessary as a majority of schools face sanctions for being, or soon to be, labeled failures under a provision in the act that states 100 percent of the nations students must be deemed proficient in math and reading by 2014.

In some states, substantial work is already

Are Mississippi schools headed for another inadequate year when it comes to funding?

Mississippi education officials informed the Legislature last week that it would take an additional $289 million to provide for the basic funding for K-12 schools.

That is not a wish-list number, mind you, but the amount determined by an established formula for providing an adequate education for Mississippis schoolchildren.

State Superintendent of Education Tom Burnham presented the recommendation to the Joint Legislative Budget Committee – a 13 percent increase – then promptly acknowledged that it would be unlikely that schools will receive that amount.

This board and the administration understands the current financial climate of the state of Mississippi, Burnham said.

That has been the sad reality when it comes to state providing resources for the school systems.

Education officials do understand hard times. Education proponents in the Legislature have had to fight to maintain so-called level funding, which was also inadequate.

But the sadder reality is that there are consequences to the continued inability of the state to adequately fund public education.

Schools have cut teacher positions. There are more students in classrooms. There are fewer teacher assistants. Building projects, repairs have been delayed or canceled. Supplies are inadequate. Parents have had to pay more to help their childrens schools. Local districts have raised taxes.

Those consequences are not merely uncomfortable inconveniences, but impact the current generation of children who are unfortunate enough to happen to have their school years fall during this recession.

Yes, everyone understands times are tough, but at some point, inadequate funding has got to become unacceptable. The continuing cycle of state budget cuts cannot continue.

Legislators do have to balance all state needs against what always will be too little revenue. There are economic realities that mean less is available.

However, lawmakers also must understand that there are long-term consequences when education is continually underfunded.

New revenue should be part of the balancing equation when the states No. 1 priority – education – continues to fall short of adequate funding.

NEW YORK (Reuters) – Volatility in equity markets is burning smart-money players, and even experienced traders are finding it hard to keep up.

Some fund managers have been dipping back into stocks to pick up bargains but could end up in a value trap if equities fall into a bear market and the economy falls into recession.

Others are taking a wait-and-see approach after getting blindsided by market swings not seen at least since the financial crisis — and by some measures well before that.

Most are unlikely to dive back in given fears over Europes debt crisis and fears of a second recession in the United States that sent equity markets sliding over the summer.

The $2 trillion hedge fund industry — often seen as the smartest of the smart — will ultimately play an important role in whether stocks can rise over the long-term. Uncertainty there means more of the same churning action and precipitous falls without that wall of money to act as a back stop.

Gross exposures have come down industrywide and large bets in either direction have also decreased because of the volatility, said Robert Francello, head of equity trading a Apex Capital, a hedge fund in San Francisco.

Francello said that as well, short-selling bans on banks in parts of Europe were hurting liquidity no question.

A recent survey of hedge fund managers found that bearish sentiment rocketed in August to its highest level in a year.

The survey by BarclayHedge and TrimTabs Investment Research showed bearish sentiment rose to 42 percent in August from 27 percent in July.

It also revealed very bearish views on the economy. About 56 percent think the US economy is already in recession or will slip into recession soon, and just 3 percent say economic growth is set to accelerate.

For Sam Ginzburg, head of capital markets at First New York Securities, where he trades his firms capital, the binary situation is presenting investors with something akin to a zero sum game.

Theres a lot of money to be made or lost right now, he said. If you have a view, meaning this isnt 2008 all over again and you think things are going to settle out and you start buying some of the mega-cap, big-cap stocks that will do well as the economy does better — or vice versa — the amount of money you can make is astounding, he said.

But for Ginzburg that time is not now. He said his fund was still light compared with the amount of money he could invest.

Over the summer the Samp;P 500 index, a broad measure of US large-cap stocks, crashed 17 percent in just 14 trading days between July 21 and August 10. For investors, that was one of the most trying periods on record, and they are just not ready to start taking on big bets.

One market veteran who runs a proprietary trading firm in New York told his traders they could go to zero (and) get the hell out of here in August as the firms inventories shrunk to just 15-20 percent of what they could be.

Its just like betting on horses, he said. That two-week period was the hardest I have ever had to deal with.

Joseph Mazzella, a senior trader at Knight Capital, agreed. Knight has one of the biggest retail books in the business and deals with a host of institutional clients.

This is the most difficult trading environment Ive ever seen, Mazzella said. Performance has struggled, its a really difficult year.

Many hedge funds cut bullish bets that they put on in the first half of the year, and comparisons with the financial meltdown of 2008-2009 abound.

There is a lot of pain out there, said Mazzella. These guys have just been whipsawed like crazy.

Earlier in the year many hedge funds built up bullish positions in growth-oriented stocks — bets that are likely to have been cut over the summer.

Data compiled by Credit Suisse from filings with regulators show that up until the end of June hedge funds were overweight stocks that are expected to do well in a growth environment.

But Pankaj Patel, the Credit Suisse analyst who compiled the data, said given what he is hearing from hedge fund clients, he expects many of them have become much more defensive.

They are not telling us that they are taking a defensive move but talking to them you could sense that, he said. Before they were not asking about the economy.

Options activity suggests uncertainty is running high.

Todd Salamone, an analyst at Schaeffers Investment Research, said an increase in early September in downside protection in the form of put option buying on major exchange-traded funds based on equity indexes suggests some funds are hedging renewed equity exposure.

However, a lack of call buying on CBOE Volatility index options, which are another hedging vehicle for fund managers, sends the opposite signal.

There is not a consensus there, and that is why we are having this choppiness, said Salomone.

In terms of institutional flows Knights Mazzella has been seeing a flight to defensive bets.

The only thing we see is a very defensive shift: utilities, healthcare, consumer staples; everything else is for sale, he said. People are playing technology a little bit but everybodys leery so its very much defensive positioning.

We went from no protection being bought in the market to massive protection, and massive defensive positioning, he said. So if you want to play the contrarian angle we probably went too far again.

(Reporting by Edward Krudy; Editing by Leslie Adler)

A Staten Island couple stole at least $2.5 million in federal funds meant for nutritious meals for preschoolers, prosecutors asserted in a criminal complaint unsealed on Friday.

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The Red Apple Child Development Center chain includes a preschool at 42-31 Colden Street in Flushing, Queens.

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Uli Seit for The New York Times

Ziming Shen, just freed on bail, scuffled with a photographer in Brooklyn on Friday.

The complaint accused the couple, Joanna Fan and her husband, Ziming Shen, of siphoning money over five years from accounts at the nonprofit Red Apple Child Development Center preschool chain, of which Ms. Fan, also known as Xiao Ping, is the executive director. The complaint accused the couple of using the money to make mortgage payments on several Manhattan condominiums and to benefit their private business interests, which include Preschool of America Inc., a chain of about a dozen for-profit preschools in Manhattan, Brooklyn and Queens.

The couple surrendered to agents of the United States Agriculture Department on Friday morning and were arraigned before Magistrate Judge James Orenstein of United States District Court in Brooklyn. They pleaded not guilty and posted bail of $750,000 each.

The judge restricted their movement to parts of New York and ordered them to surrender their passports.

“They’re going to defend this vigorously, and obviously all the facts have not come out,” Barry W. Agulnick, Mr. Shen’s lawyer, said after the arraignment.

The charge, theft from programs receiving federal funds, is punishable by up to 10 years in prison and a fine, said Robert Nardoza, a spokesman for the United States attorney for the Eastern District of New York. “As alleged in the complaint, this amounts to one of the largest lunch money thefts in history,” Mr. Nardoza said.

Red Apple Child Development Center runs six preschools in Queens, Brooklyn, Manhattan and Staten Island. Between 2002 and 2010, the preschools received $13.5 million from the Agriculture Department through a program intended to help institutions provide healthy meals and snacks to children and adults.

Audits by the New York State Health Department and the federal Agriculture Department since 2005 revealed a pattern of false submissions to the Agriculture Department, including lying about how many children were getting the meals, the complaint charges. For example, the complaint says, in January 2009, Ms. Fan submitted records claiming that 188 children had consumed 4,700 meals and snacks, when other records showed that 116 children ate 2,900 meals and snacks.

The complaint charges that in 2008, Ms. Fan issued a check for $200,000 from the federal lunch money account to make personal condominium payments, and also withdrew $110,000 to pay her personal income taxes. Between 2005 and 2010, the complaint asserts, $2.7 million went to Supermarnet, a company Mr. Shen owned, to provide meals to the preschoolers. But the complaint said invoices indicate the company spent only $24,000 for food during that period.

In all, according to the complaint, Ms. Fan stole approximately $1.8 million of program funds in 2008 and 2009. She acknowledged in a written statement to the Agriculture Department that she had taken the money, but stated that she had “borrowed” it, the complaint charged.

Ms. Fan has been a trustee of Red Apple since it was founded in 1997, and a review of recent federal tax records showed that the couple has profited in other ways. The corporation paid Mr. Shen $455,000 in 2008 for classroom rent. Ms. Fan received $105,000 annually for her work as executive director.

Red Apple had revenue of roughly $11 million in 2008. Previous annual filings showed that about half of that was from federal payments.

In August 2004, John C. Liu, the city comptroller, who was then a city councilman, spoke in support of the organization. It had been cut off from receiving city contracts for three years because a Red Apple executive allegedly tried to bribe a city inspector to ignore a falsified certificate of occupancy, The Daily News reported at the time.

A spokesman for Mr. Liu said he believed at that time that that Red Apple should again receive city funds because it had cut ties with that official and because it remained the largest provider of prekindergarten services to the Asian community.

But Mr. Liu was also sensitive to appearances; according to the spokesman, Matthew Sweeney, in July 2004 Mr. Liu returned a $500 campaign contribution that Ms. Fan had given him nine days earlier, piqued because Ms. Fan had asked for a meeting immediately after sending in the money. “Other than that, no money has been accepted from anyone at this company,” Mr. Sweeney said on Friday.

Last year, the City Education Department sent the comptroller two contracts with Red Apple for prekindergarten, totaling just over $1 million. They lacked extra monitoring that was required after the bribery charges, and they were not approved, the comptroller’s office said. There are no active Red Apple contracts with the city.

Noah Rosenberg contributed reporting.

NEW YORK — Credit card issuers are offering some of their biggest sign-on bonuses ever.

As the competition to attract customers intensifies, banks are promising an extra helping of rewards when new customers spend a set amount in the first three months. The Chase Freedom card, for example, is offering $200 cash back for customers when customers spend $500. British Airways is offering 50,000 miles — the equivalent of two domestic flights — when customers spend $2,500. The Citi ThankYou Premier card offers $250 in gift cards after customers spend $1,500.

These are some of the biggest incentives weve ever seen, said Andrew Davidson of Mintel Comperemedia, which tracks card offers.

The generous deals come as banks step up their courtship of customers with good to excellent credit records. These cardholders are especially prized in uncertain economic times because they tend to spend big yet pose little risk of default.

So if youre looking for a card ahead of the holiday shopping season, its worth checking those offers in your mailbox.

Heres how to weigh your options:

REWARDS

As tempting as it is to simply cash in on the most generous sign-on bonus, you want to be sure youre getting a card that works best for you over the long haul. For many, that means finding the card with the richest rewards.

The good news is that rewards programs have become so commonplace that card issuers are trying to distinguish themselves by offering new or faster ways to rack up miles or points. But this has also made comparison shopping a bit trickier.

Take the most popular type of rewards card, the cash back card. A common rewards rate for many cards is 1 percent back for every $1 spent. But many card issuers now tout accelerated rewards on select spending categories.

As a point of reference, a study by Bankrate.com earlier this year found that more than a quarter of the cash back cards on the market offered higher payouts for spending at certain places, such as at gas stations or supermarkets. But the caps on those accelerated rewards can vary significantly, so be sure you understand exactly how much youll be able to earn when comparing cards.

For example, the Chase Freedom and Discover More cards both give 5 percent cash back on select categories that rotate every three months.

The Chase card caps its accelerated rewards in each three-month period to $1,500 in purchases, which translates to $75 cash back.

Discovers caps, by contrast, ranged from $300 and $800 in purchases this year, depending on the categories. That translates to a maximum of $15 to $40 cash back every three months. Even with the lower cap, however, you may prefer the cards schedule of accelerated rewards categories.

In other cases, there may be a spending threshold you have to meet before you start earning the advertised rewards rate. For example, cards may give back just 0.25 percent cash back until you spend at least $3,000.

Another key term to watch is the amount of time you have to redeem your rewards; about half of cash back cards impose an expiration date, according to the Bankrate.com study. Another 31 percent give cardholders five years to redeem rewards. In some cases, card issuers may also erase or withhold rewards when customers are late on a payment.

So in addition to having a clear sense of how much you could earn with a card, be realistic about your own spending and payment habits.

FEES amp; TERMS

The majority of rewards cards dont charge an annual fee. The exceptions are airline loyalty cards or rewards cards marketed to frequent travelers, which offer perks that customers may feel are worth paying for.

For $125 a year, for example, the Citi ThankYou Premier card offers an array of benefits designed to appeal to globe-trotters. The benefits include an accelerated 1.2 points for each dollar spent in certain categories year round and one complimentary domestic airline ticket for a companion each year. The card also waives the foreign transaction fee, which is usually 3 percent of any purchase made overseas.

But as dazzling as the bells and whistles on a card may sound, be realistic on how many of them youll end up using. Otherwise, you might be better off with a reward card that doesnt charge a fee.

The other types of cards that come with annual fees are co-branded airline or hotel rewards cards. The competition in this space has been heating up as well.

Like many Republicans, Atlantas Stella Lohmann — a blogger, teacher and former journalist — is fed up with mandates, funding requests, lawsuit avoidance and a one-size-fits-all approach to education and says the federal government has undertaken a massive overreach.

Now, her question on what Republicans are going to do about it – asked during the Fox News/Google debate on Thursday night — has re-ignited a once-novel debate over eliminating the US Education Department. And judging by the GOP candidates reaction, the option may come back in vogue, if not into reality.

I am going to promise to advocate the abolishment of the federal Department of Education, said former New Mexico Gov. Gary Johnson.

What I would do as president of the United States is pass the mother of all repeal bills on education, said Minnesota Rep. Michele Bachmann. Then I would go over to the Department of Education, Id turn off the lights, I would lock the door and I would spend all the money back to the states and localities.

You need to dramatically shrink the federal Department of Education, get rid of virtually all of its regulations, former House Speaker Newt Gingrich chimed in.

Indeed, all of the GOP candidates said they would either get rid of the department — created in 1980 under President Jimmy Carter — or seriously diminish its function. Their uniform responses earned wild applause during the debate.

But the idea isnt new, Rep. Ron Paul, R-Texas, pointed out, and Republicans havent met words with actions.

In 1980, when the Republican Party ran, part of the platform was to get rid of the Department of Education. By the year 2000, (that issue) was eliminated, and we fed on to it, Paul said. Then … Republicans added No Child Left Behind.

Indeed, every year from 1980-2000, Republicans included in their platform the plank: The federal government has no constitutional authority to be involved in school curricula or to control jobs in the market place. This is why we will abolish the Department of Education, read the 1996 platform that accompanied the presidential nomination of then-Senate Minority Leader Bob Dole.

But by the mid-1990s, abolition was no longer a priority, recalled Bill Wilson, president of Americans for Limited Government.I dont think they saw it as a big winner as such. They were looking for political talking points not policy.

Whatever the reason the plank has slipped from the platform – whether because Republicans have moved onto other agenda items, or because Americans did not find it palatable, prudent or possible — the department continues to grow from its statistical collections and college loan processing.

By 2002, it had added a massive new mandate with the blessing of President George W. Bush. Aimed at increasing performance through testing, the bipartisan No Child Left Behind is in part responsible for exploding the education budget.

President Obamas 2012 spending request for the department is $77.4 billion for discretionary spending – up from $46.2 billion 10 years earlier. The department itself notes it has the third largest budget despite having the smallest staff of 15 Cabinet agencies.

The spending has conservatives shouting mad in the era of debt and deficit. But liberals, too, complain No Child Left Behind is too burdensome on teachers and school districts.

On Friday, Obama announced that he was going to propose an opt-out.

Were going to let states, schools and teachers come up with innovative ways to give our children the skills they need to compete for the jobs of the future. Because what works in Rhode Island may not be the same thing that works in Tennessee — but every student should have the same opportunity to learn and grow, no matter what state they live in, Obama said.

Despite distaste for the program, the presidents move brought criticism from both sides.

Advancing a controversial waivers plan will not only hamper efforts to chart a new course, but will prolong the failed policies of the past, wrote Rep. John Kline, R-Minn., chairman of the House Education and Workforce Committee in an op-ed in The Washington Examiner.

In the absence of congressional reauthorization, we understand why the Obama administration is taking this action; we are keenly aware of the calls from parents, teachers and administrators for change — sooner rather than later. Waivers are an imperfect answer to the stalemate in Congress and, at best, can provide only a temporary salve, said Randi Weingarten, president of the American Federation of Teachers.

Though the union and many Democrats are unlikely to sway from supporting the Education Department, Wilson said getting rid of No Child Left Behind may be the avenue to abolishing a major bureaucracy.

Any law that has automatic waivers you gotta question why it was passed in the first place,” he said.

Wilson suggested that Congress could eliminate the department through an evolutionary process adopted by a bipartisan committee tasked with choosing which programs are worth retaining and where they would be placed. He proposed a three-to-five-year dissolution plan that gives everybody time to adjust programs on the state and local level and to give federal workers at the department time to find their next job.

The odds are long, he admits, though they could go up substantially in 2013.

Anything in this town is going to be less than 50-50, Wilson said. But, there is an increasing ideological convergence from both the left and the right that theres a real problem that has to be addressed. … Given where were going and all the indications, by 2013 the finances are going to be in such dire situation that theyre going to have to look at bold moves.”

Checking and saving accounts, mortgages, and the like are the stuff of household finances, and as such are the underlying base of the larger global economy. Credit unions provide such services and facilitate consumer spending for 90 million Americans, in addition to making critical, smaller-dollar loans to businesses. Now, like every other regulatory agency at this particular economic moment, the National Credit Union Administration is eying measures that it believes would stimulate job growth in the overall economy and hedge risks in the credit union sector.

Earlier this month, at the 2011 Congressional Caucus of the National Association of Federal Credit Unions, NCUA chairman Debbie Matz outlined steps the agency is pursuing to reach those goals. The NCUA supports legislation that would raise the cap on loans that credit unions are allowed to dispense to member businesseslending that often finances payrolls and helps keep employers and their employees going.

Obviously, employment is one of the best indicators of the health of the economy, says NCUA chief economist John Worth. The key concern is really that we need positive job creation to bring down the unemployment rate.

As Matz testified [PDF] to the Senate Committee on Banking, Housing, and Urban Affairs in June, firms that employ fewer than 50 employees comprise about 40 percent of private-sector employment. More so than larger firms, small businesses often depend on access to credit for their livelihood.

Credit unions have been meeting those needs at an escalating rate, says Worth. In 2007, credit unions had approximately $20 billion in outstanding business loans on their books; by the second quarter of 2011 (the most recent data available), credit unions were holding about $37 billion in outstanding business loans.

However, federal credit unionswhich are owned and operated by their membersare currently only allowed by law to lend up to 12.25 percent of their assets to their member businesses. While some credit unions have lent up to, or near, that cap, others have told the NCUA that the cap is too low to make it worth their while to make these loans, given the costs of setting up the necessary infrastructure.

Matz supports legislation, currently making its way through Congressional channels, that would bump the cap, in stages, up to 27.5 percent.

We think that lending would obviously be good for economic growth, good for the economy, says Worth. And for credit unions it provides a valuable area for potential growth, as well as a valuable area of diversification of their portfolios.

Another major issue for the NCUA is ensuring that credit unions are accounting for the interest-rate risks in their portfolios. While neither NCUA nor the Federal Reserve foresees a strong likelihood of inflation at the moment, Worth notes that the risk of inflation, or inflation expectations jumping, or long-term interest rates jumping for another reason, is always out there.

As such, the agency introduced an interest rate risk rule that would require credit unions to maintain an interest rate risk-management policy in writing. The proposed rule is now under review by the agency, and could be finalized by the end of the year, or in early 2012.

Beyond the scope of its own corner of the fiscal world, the NCUA is also a voice on the Financial Stability Oversight Council, which was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act in the wake of the economic downturn. NCUA joins with the heads of the traditionally larger-sector banking regulators, as well as Federal Reserve and US Treasury officials, to monitor the nations financial system and identify institutions that may merit more oversight.

The council works to improve the lines of communication amongst its members, and in so doing, says Worth, creates a vehicle that can improve our ability to understand and deal with risks as theyre evolving.

ECB’s Dollar Loans Fail to Soothe Investors: Chart of the Day
September 16, 2011, 10:54 AM EDT

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By Liz Capo McCormick and Matthew Leising

Sept. 16 (Bloomberg) — U.S. and European central bank efforts to bolster euro-zone financial firms’ access to dollars haven’t soothed investor concern that the region’s lenders are risky trading partners.

The ECB, in coordination with the Federal Reserve and other central banks yesterday, said it will lend dollars to euro-area banks in a series of three-month loans to help them meet demand for dollar lending. The supply of loans in dollars has fallen as U.S. money-market mutual funds cut lending due to policy makers’ inability to contain the debt crisis.

The CHART OF THE DAY shows the difference between the three-month dollar London interbank offered rate and the overnight index swap rate, known as Libor-OIS, and the amount of U.S. commercial paper outstanding. The Libor-OIS spread, an indirect measure of the availability of funds in the money market and of banks’ willingness to lend, rose today. Three- month Libor reached 0.35133 percent from 0.35022 percent yesterday, according to the British Bankers’ Association.

“The swap lines are intended to provide liquidity to the market over year end,” said Jerome Schneider, head of the short-term strategies and money markets desk at Newport Beach, California-based Pacific Investment Management Co. “This can help improve liquidity conditions enough for short-term commercial paper investors to consider dipping their toe back in. Investors should be aware that such measures only address levels of liquidity in the market, and do not necessarily alter the credit quality within the market.”

European financial firms need dollar loans to finance holdings of dollar-denominated assets. Banks from the euro area, United Kingdom, and Switzerland had total “dollar exposures” on their balance sheet in excess of $8 trillion in 2008, of which $1.1 trillion to $1.3 trillion was funded through short- term sources, Federal Reserve Bank of New York economists Linda Goldberg, Craig Kennedy and Jason Miu wrote in a May 2011 paper.

Companies use commercial paper to fund everyday activities such as payrolls and rent. Foreign financial commercial paper fell by $600 million to $207.2 billion in the week ended Sept. 14, according to Fed data.

–Editor: Paul Cox, Greg Storey

To contact the reporter on this story: Liz Capo McCormick in New York at Emccormick7@bloomberg.net; Matthew Leising in New York at mleising@bloomberg.net

To contact the editors responsible for this story: David Liedtka at dliedtka@bloomberg.net Alan Goldstein at agoldstein5@bloomberg.net

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