With credit tight, Fed extends consumer loan plan

With banks limiting the availability of auto, student and other consumer loans, the Federal Reserve said Monday it would extend a program intended to help spur more lending at low rates.

The program is set up to provide up to $1 trillion in low-cost financing to investors to buy securities backed by consumer and commercial loans. But private economists said the program, Term Asset-Backed Securities Loan Facility, or TALF, has so far provided little benefit for consumers and businesses still struggling to get credit.

Under the program, the Fed allows for low-rate financing for investors to buy securities backed by credit card debt, auto loans, student loans and loans to small businesses.

Economists said any help for commercial real estate is vital because of the rising defaults. Small and regional banks face the greatest risk of losses from commercial real estate loans. Federal regulators on Friday announced the biggest bank failure this year, the collapse of Montgomery, Ala.-based real estate lender Colonial BancGroup Inc.