Fed updates $200B consumer loan program
WASHINGTON -- The Federal Reserve on Friday said a new program aimed at bolstering the availability of consumer loans will require companies to put up collateral to participate, but will offer longer terms on loans that are approved.
The Fed said it will make loans available to companies as long as they pledge eligible collateral to back the loan. Initially, the Fed envisioned making the loans available through an auction process. The Fed also said it will provide longer loans — three years, rather than one.
Under the program, up to $200 billion would be made available to spur auto, student and credit card loans as well as loans to small businesses. The program, unveiled late last month, is expected to get up and running early next year. It's one of a series of initiatives by the Fed to break through the debilitating credit jam that has contributed to the painful recession.
The Fed plans to buy securities backed by different types of debt including credit card, auto, student and small business loans. The credit crunch — the worst since the 1930s — has made it much more difficult for people to obtain such financing. And, those that do, can be socked with high rates.
The changes are aimed at making sure the program is attractive to companies so they use it, Fed officials say. If the program is a success, these targeted consumer and small-business loans will become more plentiful and less expensive. The changes were made after the Fed consulted with issuers of so-called asset-backed securities, investors and dealers.
Related Stories
ABC News Live