Investors Seek $11.5B From Consumer Loan Program

Investors on Tuesday showed a bigger appetite for participating in a government program intended to boost the availability of loans to consumers and small businesses at cheaper rates.

Investors requested $11.5 billion worth of loans, the Federal Reserve Bank of New York said. That tally was up from $10.6 billion requested last month and the largest amount since the program started in March.

Investors are buying newly issued securities backed by, among other things, auto and student loans, credit cards, business equipment and loans guaranteed by the Small Business Administration.

Some analysts say the program has reduced credit pressures for companies, but others contend it has yet to filter down to consumers.

"We are still not seeing the lending flow through," said T.J. Marta, market strategist and founder of Marta on the Markets, a financial research firm. "You are not seeing overwhelming help."

The Term-Asset-Backed Securities Loan Program, or TALF, figures prominently in efforts by the Fed and the Obama administration to ease credit, stabilize the financial system and help end the recession.

The TALF has the potential to generate up to $1 trillion in lending for households and businesses. Spurring such lending is vital to turning around the economy.

Michael Feroli, economist at JPMorgan Economics, said the program has helped narrow the big gap between rates on some asset-backed securities collateralized by credit cards and super-safe Treasury securities, which is viewed as a sign of some easing in credit stresses.

"I think the mere presence of the TALF program helped," he said. The gap between these two securities is still wide but is down considerably from the beginning of this year.

Of the $11.5 billion in loans requested, $6.2 billion was for securities backed by credit cards. Another $3.3 billion was for securities backed by auto loans. The rest of the money fell into other categories, including securities backed by student loans and business equipment.