US authorities Tuesday formally launched a program designed to pump 200 billion dollars into consumer credit through the purchase of securities linked to various loans.
The program, which could grow up to one trillion dollars, aims to break a credit crunch by buying up asset-backed securities linked to credit cards, auto loans and other types of consumer credit.
Called the Term Asset-Backed Securities Loan Facility (TALF), the program is designed "to catalyze" credit markets that have been "virtually shuttered since the worsening of the financial crisis in October," according to a joint Treasury and Federal Reserve statement.
The program aims to jump-start lending in key areas for consumers and small businesses, and could ease the credit crunch that is choking off economic activity, officials said.
"By reopening these markets, the TALF will assist lenders in meeting the borrowing needs of consumers and small businesses, helping to stimulate the broader economy," the statement said.
As the launch was announced, Federal Reserve chairman Ben Bernanke said that this and other efforts by the central bank along with a huge stimulus program should over time provide "solid gains" for the recession-plagued economy.
Appearing before the Senate Budget Committee, Bernanke said the short-term economic outlook remains troubling but that the various stimulus efforts and moves to stabilize the financial system will eventually help lift activity.
"Although the near-term outlook for the economy is weak, over time, a number of factors should promote the return of solid gains in economic activity in the context of low and stable inflation," he said in his prepared remarks.
Bernanke said there was still considerable uncertainty about the recovery from the deep recession that began in December 2007 and has been intensifying, but pledged to continue efforts to break a credit crunch.