(Recasts, adds details on legislation Fed seeking, background, changes byline)

By Mark Felsenthal and David Lawder

WASHINGTON, March 3 (Reuters) - The U.S. Federal Reserve on Tuesday laid out plans for a program to spur consumer lending that could grow to $1 trillion and said it was widening the effort in order to help credit-starved businesses.

Originally envisioned to support auto, credit card, student and some small business loans, the Fed said it had decided to expand the so-called Term Asset-Backed Securities Loan Facility, or TALF, to cover equipment and vehicle fleet leases.

The Fed hopes the program, in which it will lend against a variety of top-rated asset-backed securities held by investors, will restore credit flows at a time loss-laden banks are hesitant to lend. It will begin lending on March 25.

In a joint statement with the U.S. Treasury, the central bank said it might further widen the program in the future to riskier mortgage and debt securities now plaguing banks.

"Ultimately, the program should bring down the cost and increase the availability of new credit to consumers and businesses," the Treasury said in a position paper. For a factbox on the program, see [ID:nN03470355]

SECURITIZATION MARKETS

The program is the latest in a series of unprecedented efforts to reverse the U.S. economy's steep downward slide and a financial market implosion sparked by mortgage defaults.