by Sundeep Kothari
Atlanta Georgia Bankruptcy Attorney
$200 Billion Consumer Credit Program
The Federal Reserve announced a $200 billion securitization program to help spur consumer lending for cars, credit cards, education and small businesses.
Prior to the financial meltdown that began in September 2008, banks relied heavily on packaging loans into securities and selling them to fund additional lending. This process has financed about 1/4 of all auto, student and other consumer loans in recent years, the Treasury Department said Tuesday, until the credit markets ground to a halt in October.
So basically, the Fed is trying to spur consumer spending by backing up credit cards, auto loans the rest. So essentially they are acting as a national bank. Not a huge national bank, but still a small player in the market.
Will this work? Possibly. It can help some people buy items that otherwise they wouldn’t be able to. But consumer spending is time significantly, as job losses are piling up, and hours are being reduced. In addition, people’s attitudes towards debt has changed significantly, as frugality has become the latest fad.
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