Paulson to unveil facility to boost consumer loans

U.S. Treasury Secretary Henry Paulson plans to announce on Tuesday the formation of a program to increase the availability of auto loans, student loans and credit cards, the Wall Street Journal reported, citing people familiar with the matter.

The lending facility, which will be operated by the Federal Reserve, is expected to provide loans to investors who want to buy securities backed by credit cards, auto loans and student loans, the people told the paper.

The U.S. Treasury will contribute between $25 billion to $100 billion to the facility from its $700 billion Troubled Asset Relief Program (TARP), the paper said.

The program is aimed at making it easier for consumers to borrow money, the paper said adding that government officials, including Paulson, have grown concerned about "distress" in the consumer finance market, as the availability of household loans has ground to a halt in a broader credit crunch.

While the initial focus will be on consumer loans, the facility could eventually be expanded to cover all manner of assets, including mortgages, according to the paper.

The facility could eventually help remove some bad loans and other distressed assets financial institutions were hoping to sell to the government through its initial TARP program, by encouraging private investors to buy them, the WSJ said.

It's unclear whether there will be restrictions on the types of investors who are able to borrow money, how the Federal Reserve will judge their credit worthiness and how the government will ensure they are using the loans to buy the intended assets, the Journal said.