Well, that time may have finally come. On Tuesday, the Federal Reserve introduced the Term Asset-Backed Securities Loan Facility – more easily referred to as TALF – which could help free up consumer credit.
It also announced separate plans aimed at helping people obtain home loans.
Under TALF, the Fed will set up a facility which uses $200 billion to support holders of securities backed by credit card debt, student loans, car loans and small business loans.
Meanwhile, another initiative will purchase $600 billion in mortgage-backed securities held by Fannie Mae and Freddie Mac.
The idea behind both measures is to make it easier for the average person to get their hands on credit of all kinds.
You may be wondering: wasn’t the original bank bailout (TARP) supposed to do that? The answer is yes, but it has not exactly gone to plan.
The problem is that banks have still found themselves financially strapped because they are increasingly unable to sell existing debt to investors – and that was their primary way of funding new loans before the credit crunch.
So, the hope is that this latest acronym will actually throw a lifeline to the people who support the economy through spending and borrowing: consumers.
However, some have raised concerns that promoting further borrowing may not be the best approach to take when excessive mortgage and credit card debt is part of what got us into this problem in the first place.
“Does Washington really want banks to go out and start making more problem loans just to have this same problem again in five years?” economist John Norris asked on CNN Money.
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