January 15, 2013 / 7:11 PM / 5 years ago

Treasury ends credit backing for crisis-era Fed loans

WASHINGTON (Reuters) - The Treasury Department will no longer provide credit backing for a crisis-era emergency lending program from the Federal Reserve that is gradually winding down.

The Fed said on Tuesday that because the fees collected from the loan program for asset-backed securities -- bonds backed by pools of assets such as autos or mortgages -- exceed the amount of financing still outstanding, it no longer faces the risk of losses.

The program led to a total of $71 billion in loans issued by the New York Federal Reserve Bank, the Fed said.

The Treasury said in a release the Treasury Asset-Backed Securities Loan Facility, known as TALF, has thus far yielded a profit of $173 million. Funds used for Treasury's guarantee of the Fed's loans came from the Treasury Asset Relief Program, or TARP.

That bank bailout program proved controversial as many Americans felt banks were helped at the expense of households.

Treasury said TALF provided a boost to economic growth.

"The TALF helped support the economy by increasing credit availability to American households and businesses," the Treasury said in a statement.

For the TARP program as a whole, Treasury says it has collected $387 billion, or 93 percent of the $418 billion in total funds disbursed.

Last month, the Treasury sold its remaining stake in insurer AIG, ending a bailout that became a symbol of financial industry coddling during the 2008 meltdown.

Reporting By Pedro Nicolaci da Costa; Editing by Chizu Nomiyama

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