In an effort to loosen the ever-tightening credit market, the Federal Reserve and Treasury Department have announced two plans – worth $800 billion in all – to make credit and loans more readily available to consumers. The programs are intended to keep the U.S. from sliding into a deep recession, and could be just what the automakers need to get by during these tough times.
The first program will see the Federal Reserve offering $200 billion for consumer debt, which will aid consumer loans such as credit cards, auto loans and student loans, according to the Detroit News. The Fed is hopeful that its program will bolster interest in such loans through lower interest rates and greater availability of credit.
The combination of freer credit and end off year sales could mean a jump in December new car sales figures. The Detroit Three argue their current financial situation is largely the result of credit crunch, which made it harder for consumers to buy cars.
The remaining $600 billion will be comprised of the purchase of mortgaged-backed assets. One-hundred billion of that will go toward purchasing mortgages from Fannie Mae and Freddie Mac, while the remaining $500 billion will cover mortgages usually sold to investors.
It remains to be seen how the market will react to a looser credit market, but the news is certainly encouraging for the automakers. The availability of credit was one of the biggest factors in dwindling new car sales, so it’s possible the move could bolster sales — albeit not back to 2007 levels.
