Investors on Tuesday showed a smaller appetite for participating in a government program intended to spur lending to consumers and small businesses at lower rates.
Investors requested $5.4 billion worth of loans, the Federal Reserve Bank of New York said. That tally for July is down from $11.5 billion last month.
Investors use the money to buy newly issued securities backed by, among other things, auto and student loans, credit cards, business equipment and loans guaranteed by the Small Business Administration.
The Term-Asset-Backed Securities Loan Facility, or TALF, started in March and figures prominently in efforts by the Fed and the Obama administration to ease credit, stabilize the financial system and help end the recession.
The TALF has the potential to generate up to $1 trillion in lending for households and businesses. Spurring such lending is vital to turning around the economy.
The program had gotten off to a lethargic start, hobbled by rule changes, investor worries about financial privacy and fears that participants might become ensnared in an anti-bailout backlash from the public and Congress.
Although some credit and financial stresses have eased, experts say it is still difficult for many consumers to secure credit to finance big-ticket purchases such as homes, cars, appliances and school.
Of the $5.4 billion in loans requested in July, $2.8 billion was to buy securities backed by auto loans, $1.5 billion was for securities backed by credit cards, and $986.7 million was for securities backed by student loans. The rest was for loans backed by the SBA and transactions linked to companies that service home mortgages.
In mid-June, investors passed on their first chance to buy newly issued securities backed by commercial real estate loans when that part of the TALF program was rolled out. It is designed to boost the availability of commercial real estate loans, help prevent defaults and facilitate the sale of distressed properties.
Copyright 2009 The Associated Press.