Treasury Secretary Henry Paulson Jr. announced a plan this morning that calls for the Treasury and the Federal Reserve to create a facility to finance issuance of non-mortgage asset-backed paper. The program is meant to get liquidity flowing back into the auto loan, student loan, and credit card markets.
The asset-backed market “essentially came to a halt in October,” Paulson said. “As a result, millions of Americans cannot find affordable financing for their basic credit needs,” he added.
Specifically, the Treasury will provide $20 billion of credit protection to the Federal Reserve in connection with its $200 billion Term Asset-Backed Securities Loan Facility. The facility will enable lenders to securitize loans, a move that will provide them with necessary funds to originate new loans.
Paulson added that $200 billion is “a starting point,” and the program may be expanded at some point to a larger dollar amount or to other asset classes.
Finally, some good news for the industry.
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