Under the Term Asset-Backed Securities Loan Facility, or TALF, the Federal Reserve Bank of New York will lend up to $200 billion to investors. The U.S. Treasury will also contribute $20 billion, using funds from the Troubled Asset Relief Program, the Fed said in a statement.
The program is designed to ease credit for consumers. In addition, the funds would be available for loans backed by the Small Business Administration, the statement said.
"New issuance of ABS (asset-backed securities) declined precipitously in September and came to a halt in October," the Fed statement said. "Continued disruption of these markets could significantly limit the availability of credit to households and small businesses, and thereby contribute to further weakening of U.S. economic activity."
"By providing liquidity to issuers of consumer asset backed paper, the Federal Reserve facility will enable a broad range of institutions to step up their lending," Treasury Secretary Henry Paulson Jr. said introducing the package in Washington Tuesday.
In addition, "the facility may be expanded over time," Paulson said.