UPDATE 1-US Treasury plan could help automakers--Rep. Frank

WASHINGTON, Oct 14 (Reuters) - The U.S. government's $700 billion market rescue plan could assist automakers such as General Motors Corp GM.N by buying up distressed auto loans, a top lawmaker said on Tuesday.

"Under the buying up of assets, they could buy up automobile loans," said Barney Frank, a Massachusetts Democrat who chairs the House Financial Services Committee.

Frank also said U.S. banks receiving capital injections under a U.S. Treasury plan to infuse $250 billion into the troubled sector are expected to use the funds to support lending activities.

On Tuesday morning the Treasury Department unveiled more details of how it plans to implement the $700 billion bailout plan passed earlier this month, saying it would directly inject capital into U.S. financial institutions. It said nine banks have already signed on to the program; it did not name the nine.

Frank said the nine are "relatively healthy" and do not appear to be at risk of sustaining large losses from credit default swaps, insurance-like products that protect a bigger investment.

He also said he hoped private capital would follow the government funds.

"There's a good chance that in at least some of these cases it will work well, and that would encourage private capital," Frank said. "We have to be careful not to insist on instantaneous results."

He said reforms will follow quickly, including global restrictions on leveraging and risk-taking, along with reform of credit rating agencies, which he said "made the mistake of telling us what they didn't know."

While Frank has been a critic of rating agencies being too lax in the past, he said on Tuesday they now seem to be leaning too far the other way.

"Now I think rating agencies in some cases have been too tough," he said. He was speaking following a meeting of the Urban Land Institute, a nonprofit research and education organization. (Reporting by Karey Wutkowski; editing by John Wallace)