So The U.S. Fed Think They Can Dance With $800 Billion?

Washington, D.C. - Is the Fed finally figuring it out?

Early Tuesday, the U.S. Federal Reserve and the Treasury have decided to step up their efforts to unfreeze credit for the consumers and home buyers by providing up to $800 billion, which is more than what Congress authorized in October.

But the news reports seemed to consider the billion-dollar plan as a backstop for the asset-backed-securities program originating entirely from its Troubled Asset Relief Program (TARP).

Secretary Henry Paulson announced the measure today "to finance the issuance of non-mortgage asset-backed paper in order to support lending to consumers and small businesses that is vital to our economy."

The consumer asset backed securities market is a source of liquidity to financial institutions that provide federally-guaranteed small business loans and consumer lending such as auto loans, student loans and credit cards.

The central bank of the country is prepared to purchase $600 billion in debt issued or backed by government-chartered housing-finance companies, according to Bloomberg News.

The remaining, issued by the Federal Reserve Bank of New York, will be used to aid consumer and small-business loans under Term Asset Backed Securities Loan Facility.

"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, enabling borrowers to have access to lower cost consumer finance and small business loans," Paulson said.

The statement from Paulson indicated that issuance of such securities in these areas reached $240 billion in 2007, "but credit market stresses led to a steep decline in the third quarter of 2008, and the market essentially came to a halt in October."