Latest Bailout Put To Reality Check

Tuesday, November 25th 2008, 5:37 pm
By: News On 6

By Dan Bewley and Terry Hood, The News On 6

UNDATED -- A new government plan unveiled on Tuesday is designed to help the everyday person.  The U.S. Treasury Department says the $800 billion will help unfreeze the market for consumer debt.

It is the latest step by the feds to get the U.S. financial system back to normal and stop the slide into a deep recession.  The program will be run by the Federal Reserve and the Treasury Department.

It calls for $200 billion to be loaned to financial firms that hold Triple-A rated securities, which means it's considered exceptionally safe.  The loans will be used to back a variety of consumer loans, like credit cards, auto loans, even student loans. 

Analysts say it will make it easier for consumers to get credit, because part of the problem now is that lenders are tightening their pocketbooks.

The other $600 billion will be used to buy mortgage backed securities issued by Fannie Mae, Freddie Mac, and other government programs.  You can think of it as unclogging a drain.  Economists say the billions of dollars will get rid of bad assets from the balance sheets of lenders.

Treasury Secretary Henry Paulson says lending nearly came to a halt in October and the new programs are aimed to get it back to normal levels.