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Fed to Change Course, Include Auto Loans in $200 Billion Facility

December 1, 2008

WASHINGTON — The latest reports from Treasury Secretary Henry Paulson's office indicate that $200 billion worth of federal aid will be appropriated to fund a plan to support consumer and small-business debt, including auto loans.

"The financial markets are not working as we'd like them to work," Paulson said, "and this is an effort to address that situation."

The facility is designed to generate increased credit availability and to support economic activity by facilitating renewed issuance of consumer and small-business asset-backed securities at what the Fed called "more normal interest-rate spreads," according to the Wall Street Journal's MarketWatch.com.

Paulson first announced a change in course on Nov. 12, when he admitted that the Fed's original plan to appropriate all of the Emergency Economic Stabilization Act's $700 billion to the purchase of 'toxic' mortgage-backed assets did not appear to be working as planned. He turned his focus to the market for credit-card receivables, auto loans and student loans.

"This market, which is vital for lending and growth, has for all practical purposes ground to a halt," he said. "With the Federal Reserve, we are exploring the development of a potential liquidity facility for highly-rated AAA asset-backed securities."

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