Government to aid credit issuers with $7.76 trillion

by Dave Keating | November 25, 2008 at 05:23 am

115 views | 8 Recommendations | 0 comments

UPDATE 2:38 EST: The US treasury department has revealed it is going to provide an unprecedented $7.76 trillion for guaranteeing Citigroup's debt in a bid to rescue the frozen credit markets for consumers.

The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

PREVIOUS: Treasury secretary Hank Paulson's latest plan to spend the $700 billion bailout package is to use some of the money to help consumer lending companies, according to reports this morning. These companies issue credit cards and make loans for college and homes. Many industries are suffering collateral damage because consumers have been unable to get credit, particularly the auto industry.

The government is working on a new loan program to help companies that issue credit cards, make student loans and finance car purchases.

The Treasury Department and the Federal Reserve will unveil the program Tuesday, according to people familar with the plan. They spoke on condition of anomymity because a formal announcement has yet to be made.

Treasury Secretary Henry Paulson has said he plans to use a "relatively modest share" of the $700 billion financial bailout money to pay for the new program.