TARP Funds to Federal Reserve to Create Consumer ABS Lending Facility

Consumers and small businesses who are pressed for credit and lending options will have greater support through the creation of a new facility to issue asset-backed securities (ABS), through  funding from the Troubled Asset Relief Program (TARP).

The Treasury is to provide the Federal Reserve with $20 billion of credit protection in connection with the Term Asset Back Securities Loan Facility,  valued at $200 billion.

This facility will fill a void in the ABS market, on which financial institutions have relied in order to provide consumers with federally-guaranteed small business loans, in addition to credit cards, student loans and car loans. More affordable consumer credit is needed to get the market fully active and running again.

To increase lending activity, the Federal Reserve facility will offer liquidity to the issuers of consumer asset-backed paper, giving borrowers more access to affordable loans. The facility may be grown to take on other assets in the future, such as commercial mortgage-backed securities and non-agency residential mortgage-backed securities.

This measure is designed to address the greater goal of stabilizing the credit system and supporting the lending industry that is vital to a healthy economy.