U.S. Moves to Revive Consumer Lending – washingtonpost.com
The Federal Reserve will launch a program by the end of the year in which it will buy up to $500 billion of securities backed by mortgages, which are guaranteed by Fannie Mae and Freddie Mac. The Fed will also buy up to $100 billion of debt in Fannie Mae and Freddie Mac, which should let them more easily expand their lending.
With the moves, the Fed will be pumping money into the economy through unconventional new means, steps that analysts said should reduce the rates that people must pay to take out a mortgage loan by as much as a full percentage point. In anticipation of the program yesterday, rates on mortgage securities fell about a third of a percentage point, a drop that is likely to be passed through to borrowers in the near future.
The Fed and Treasury Department are also creating a $200 billion program that will lend against highly rated securities backed by auto loans, student loans, credit card lending and small-business loans backed by the Small Business Administration. Lately, there have been few buyers for packages of those loans, making it difficult for consumers to borrow money.