Billions coming for mortgages, credit cards, student, car loans

WASHINGTON -- The Federal Reserve on Tuesday unveiled $800 billion in programs designed to relieve severe pressures in financial markets, and ensure that mortgages, student loans, car loans and other forms of consumer credit remain available at reasonable prices.

"Millions of Americans cannot find affordable financing for their basic credit needs," Treasury Secretary Henry Paulson said, announcing the moves jointly with the Federal Reserve. "This lack of affordable consumer credit undermines consumer spending and as a result weakens our economy."

In the latest in a series of increasingly dramatic announcements, the Federal Reserve said Tuesday that it would buy up to $600 billion in mortgage-related assets, including $100 billion in bonds or other debt issued by Fannie Mae and Freddie Mac and the Federal Home Loan Banks, and $500 billion in other mortgage-backed securities guaranteed by the government entities, including Ginnie Mae, which oversees Federal Housing Administration mortgages.

The move is intended to pump cash back into the mortgage lending process and increase the availability and affordability of mortgage financing. Paulson said "nothing is more important" to housing and the overall economy than making mortgages easier and more affordable to obtain.

The Fed also said it would lend up to $200 billion to securities dealers and other financial firms that hold Triple-A rated securities backed by "newly and recently originated" consumer loans, such as credit cards and auto loans. The program will also cover loans originated by the government's Small Business Administration.

The Treasury will provide $20 billion from the recently enacted $700 billion financial rescue package to cover potential losses from the program. The first losses will be borne by borrowers under criteria yet to be determined.

Paulson called the $200 billion a "starting point," and said the amount could be increased and the program expanded to other kinds of securities, such as commercial mortgage-backed securities.