Paulson Says New Fed, Treasury Steps Will Help Lending, Housing
Nov. 25 (Bloomberg) — U.S. Treasury Secretary Henry Paulson said a Federal Reserve lending program announced today will enable banks to extend more credit to consumers and businesses.
“I and my regulatory colleagues are committed to using all the tools at our disposal to preserve the strength of our financial institutions and stabilize our financial markets, to minimize the spillover into the rest of the economy,” Paulson said in a statement at a press conference in Washington.
The Treasury committed $20 billion of its Troubled Asset Relief Program as part of a new $200 billion plan to support consumer and small-business loans. The Fed separately said it will buy as much as $600 billion in debt issued or backed by government-chartered housing finance companies such as Fannie Mae and Freddie Mac.
The program “underscores our support for the housing market,” Paulson said. “Nothing is more important to getting through this housing correction than the availability of mortgage finance.”
The efforts by Paulson and Fed Chairman Ben S. Bernanke are the latest attempt to alleviate the credit crunch. Paulson has committed all except $20 billion of the first half of the $700 billion TARP program with less than two months before the end of the Bush administration.
“It will take time to work through the difficulties in our markets and our economy, and new challenges will continue to arise,” Paulson said.
Under the new Term Asset-Backed Securities Loan Facility, the Fed will lend as much as $200 billion on a non-recourse basis to holders of AAA rated asset-backed securities backed by “newly and recently originated” loans, such as for education, credit cards, automobiles and loans guaranteed by the Small Business Administration.
Paulson has committed $270 billion to inject capital into banks, including $20 billion as part of a rescue of Citigroup Inc. two days ago, and brokered a deal providing $40 billion to insurer American International Group Inc.