Kashkari: Consumer credit help promising step

WASHINGTON (Reuters) - Actions to support consumer lending could be a productive next step to help repair financial markets, Treasury Department financial rescue package administrator Neel Kashkari said on Wednesday.

"The consumer securitization market appears to be a promising opportunity," he said. "This would help bring down rates of auto loans, credit cards and student loans and could be achieved with a more modest allocation from the TARP (Troubled Asset Relief Program)," Kashkari said in remarks prepared for delivery to Women in Housing and Finance.

Kashkari said interbank lending rates have settled since a peak in early October, signaling that financial markets are returning to normal.

"We believe the combined actions of Treasury, the Federal Reserve and FDIC (Federal Deposit Insurance Corp) have stabilized the financial system and prevented a financial collapse," he said.

The Treasury has been sharply criticized for saying it needed the $700 billion stabilization fund to buy up mortgage assets tainted by exposure to delinquent loans but then using it to take equity stakes in banks and other financial institutions.

Kashkari said that shift was necessary because of the rapid deterioration of financial market stability in late September and early October.

"An emphasis on additional capital seems to us to be an appropriate focus today," he said.

(Reporting by Mark Felsenthal; Editing by James Dalgleish)