Feds Aim to Generate $1T in Consumer Loans

By Harry Kimball,  Newser Staff
Posted Mar 3, 2009 10:23 PM CST
Treasury Secretary Timothy Geithner testifies on Capitol Hill in Washington, Tuesday, March 3, 2009, before the House Ways and Means Committee.   (AP Photo/Susan Walsh)
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(Newser) – There's a new acronym in bailout land: TALF. Officials at the Fed and Treasury Department today outlined the new lending program, which is designed to revive the nation's so-called shadow banking system and generate up to $1 trillion in loans to consumers and small businesses, the Wall Street Journal reports. The Term Asset-Backed Securities Loan Facility is bankrolled in large part by the New York Fed, which is in for $200 billion.

Despite the jargon and the arcane nature of the lending, this could be a big deal, the Journal notes. These securitized loans, which operate outside the traditional banking system, accounted for 40% of all consumer lending before the current crisis. Then they virtually dried up. "There has been somewhat of a collapse of the banking system, but an almost total collapse of the shadow banking system," said a Princeton economist. "Given our reliance on the latter, we need to get that shadow banking system revived."