In its continued fight against the economic meltdown, the US Government on Tuesday announced yet another package of a whopping $800 billion (about Rs 40 lakh crore) with a view to augmenting consumer loans by the near-bankrupt banking and mortgage institutions.This mega package is in addition to the $700-billion rescue plan, which was cleared after several rounds of intense debate in the US Congress.
The US Federal Reserve said it would buy mortgage-backed securities (MBS) worth $600 billion, which would in turn encourage lending. Further, the apex bank would launch a new facility aimed at thawing the credit market for consumers, especially in supporting issuance of auto and student loans.
In a statement on Tuesday, the US Fed announced that it would launch a programme to purchase direct obligations of housing-related Government-Sponsored Enterprises (GSEs) and mortgage-backed securities of Fannie Mae, Freddie Mac and Ginnie Mae.
The apex bank pointed out that the action was being taken to reduce cost and increase availability of credit for purchase of houses. This would, in turn, help in supporting housing markets and foster better financial market conditions.
"Purchases of up to $100 billion in GSE's direct obligations under the programme will be conducted with the Federal Reserve's primary dealers through a series of competitive auctions and will begin next week.
"Purchases of up to $500 billion in MBS will be conducted by asset managers selected via a competitive process with a goal of beginning these purchases before year-end," the US Fed noted.
Further, in a separate statement, the apex bank said it would create Term Asset-Backed Securities Loan Facility (TALF) to lend up to $200 billion, to unfreeze the credit needs of consumers and small businesses.
The US Federal Reserve said it would buy mortgage-backed securities (MBS) worth $600 billion, which would in turn encourage lending. Further, the apex bank would launch a new facility aimed at thawing the credit market for consumers, especially in supporting issuance of auto and student loans.
In a statement on Tuesday, the US Fed announced that it would launch a programme to purchase direct obligations of housing-related Government-Sponsored Enterprises (GSEs) and mortgage-backed securities of Fannie Mae, Freddie Mac and Ginnie Mae.
The apex bank pointed out that the action was being taken to reduce cost and increase availability of credit for purchase of houses. This would, in turn, help in supporting housing markets and foster better financial market conditions.
"Purchases of up to $100 billion in GSE's direct obligations under the programme will be conducted with the Federal Reserve's primary dealers through a series of competitive auctions and will begin next week.
"Purchases of up to $500 billion in MBS will be conducted by asset managers selected via a competitive process with a goal of beginning these purchases before year-end," the US Fed noted.
Further, in a separate statement, the apex bank said it would create Term Asset-Backed Securities Loan Facility (TALF) to lend up to $200 billion, to unfreeze the credit needs of consumers and small businesses.
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