Fed throws fresh lifeline to stressed households

By Mark Felsenthal

WASHINGTON (Reuters) - The Federal Reserve threw a massive life-line to consumers on Tuesday with two new programs aimed at making it easier for them to obtain loans for homes, cars and on credit cards.

Under the new mortgage program, the Fed will buy up to $100 billion of debt issued by government-sponsored mortgage enterprises Fannie Mae, Freddie Mac and the Federal Home Loan Banks. It will also buy up to $500 billion of mortgage securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae.

The central bank also launched a $200 billion facility to support consumer finance, including student, auto, and credit card loans and loans backed by the federal Small Business Administration. This will lend to investors who hold securities backed by this debt.

The launch of the two programs lifted investor spirits and drove up the blue chip Dow Jones industrial average more than 100 points, or about 1.3 percent, within minutes of its open.

"One of the big problems we have is that there has been a lack of demand for debt. You have seen the market for securitized debt such as credit cards or student loans dry up completely," said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Florida.

"Here is the Fed taking a bunch of debt out of the market," he said. "It should help unblock the credit markets."

The new mortgage-support facility was intended to strike at the collapsed housing market, the core of the United States' economic woes.