Last August and September, Asset Backed Commercial Paper was at the forefront of the beginning credit crisis. I wrote about it quite often. The media covered it- not very well - but they covered it. The Fed and Treasury department created programs to deal with it. Then around New Year, the ABCP actually increased a bit and many people were quick to suggest that this was evidence that the worst was behind us and the ABCP market was stabilizing. I disagreed but nonetheless, the media and investors stopped worrying about ABCP in favor of other things like Bear Stearns. From last year’s peak until the end of 2007, ABCP shrunk from about $1.2 trillion to $780 billion. Despite no one apparently caring since the ABCP supposedly bottomed in January, we’ve shrunk by another $57 billion. I guess some people might suggest that less ABCP is a good thing since there is less to hurt us with. Others suggest that more ABCP is a good thing since this means that there is more liquidity and an appetite for investor risk. But where did all the stuff go? At first, it went onto bank balance sheets. Then on May 2, I guess that wasn’t good enough or maybe the banks had too much of what they never wanted in the first place. So Bernanke to the rescue by allowing “AAA-rated” ABCP to be offered as collateral in the Term Securities Lending Facilty (TSLF).  So let’s say the auto loan, student loan and credit card ABCP starts to ramp up again.  This does not mean that credit quality from the borrowers has improved.  All it means is that the Fed’s balance sheet is opened up to take on as much of this crap as they can create.