Federal Aid to Go to Credit Card Companies
Federal Aid to Go to Credit Card Companies
The Federal Government just announced a new plan that will help credit card companies. Government leaders are working on a new facility that will encourage companies to issue credit cards.
This new program will actually help companies make student loans, finance car loans and issue credit cards. The plan is expected to be unveiled shortly. Additionally, the Federal Reserve announced that it will buy up to $600 billion mortgage-backed assets.
Henry Paulson, the Treasury Secretary, said that a “relatively modest share” of the bailout plan will be used for the new program. Here’s how it is expected to work.
The government will purchase up to $100 billion in direct obligations. These obligations will be purchased from mortgage giants. Another $500 billion will be bought in mortgage-backed securities.
Since the financial crisis hit several months ago, credit card companies have really tightened their standards. A recent survey shows that nearly 60 percent of banks have tightened their lending standards and will continue to do so.
In fact, American Express recently announced its plan to become a financial institution instead of just a credit card giant. Citigroup has also announced its plan for the future. Credit card companies are having to get serious about lending practices to stay afloat. Luckily, these companies will now get government aid. This step alone will do a lot to save the American economy.
When the bailout bill was initially passed, it didn’t look like credit card companies were going to get any federal aid. The tables have turned now as the government realizes what an important role credit card companies play in our everyday economy.
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