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Government Plans Program to Aid Credit Issuers

By AP
Tuesday, 25 Nov 2008 | 8:34 AM ET

The government is working on a new loan program to help companies that issue credit cards, make student loans and finance car purchases, people familiar with the plan said Tuesday.

The Treasury Department and the Federal Reserve will unveil the program Tuesday. It will include efforts to back the mortgage market as well.

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Those who spoke about the plan did so on condition of anonymity because a formal announcement had 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.

It's the latest effort by the government to break through a dangerous credit clog that has badly hurt the economy.

Since the financial meltdown accelerated in September, credit card issuers have been tightening their standards.

A survey released Nov. 3 by the Federal Reserve found that a sizable percentages of banks had "continued to tighten their lending standards and terms on all major loan categories over the previous three months." Nearly 60 percent of banks responding to the survey said they had tightened lending standards on credit card debt.

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