Treasury Secretary Henry Paulson, seeking to ease strains in the consumer credit market, plans to announce Tuesday the formation of a program to increase the availability of auto loans, student loans and credit cards, according to people familiar with the matter.
The lending facility, which will be operated by the Federal Reserve, is expected to provide loans to investors who want to buy securities backed by credit cards, auto loans and student loans, these people said. Treasury will contribute between $25 billion to $100 billion to the facility from its $700 billion Troubled Asset Relief Program.
The program is aimed at making it easier for consumers to borrow money. Government officials, including Mr. Paulson, have grown concerned about "distress" in the consumer finance market, as the availability of household loans has ground to halt amid a broader credit crunch.
While the initial focus will be on consumer loans, the facility could eventually be expanded to cover all manner of assets, including mortgages.
Treasury had initially planned to use its $700 billion to buy those types of assets itself but changed plans two weeks ago, deciding instead to concentrate on pumping money directly into banks and other financial institutions. Treasury has set up a $250 billion program to invest in banks.
While the government had hoped to see banks lend that money out, that hasn't happened as quickly as they would have liked. Treasury is trying to find other ways to jump-start the market for lending.