The U.S. Treasury Department and the Federal Reserve Board on Tuesday announced the launch of the Term Asset-Backed Securities Loan Facility (TALF), which has the potential to generate up to $1 trillion of lending for businesses and households.

Under the TALF program, the Federal Reserve Bank of New York will lend up to $200 billion to eligible owners of certain AAA-rated asset-backed securities backed by newly and recently originated automobile loans, credit card loans, student loans and loans guaranteed by the U.S. Small Business Administration. Issuers and investors in the private sector are expected to begin arranging and marketing new securitizations of recently generated loans later this month.

By reopening these markets, the TALF will assist lenders in meeting the borrowing needs of consumers and small businesses, helping stimulate the broader economy, Treasury officials said in a press release.

The move will not directly affect most Iowa banks, said John Sorensen, president and CEO of the Iowa Bankers Association. “What the Fed is attempting to do is improve liquidity in those asset-backed products, which frankly has been a real source of credit for consumers,” he said. “Clearly, the Fed believes we have a responsibility as a country to improve the willingness and confidence of investors in those securities.”

At the height of the credit boom, Wall Street issued more than $1 trillion a year of securities that were backed by consumer credit, and trillions more backed by mortgages, according to an article in The Wall Street Journal. Sometimes referred to as the “shadow banking system” because they operate outside traditional bank activity, these markets accounted for some 40 percent of consumer lending before the financial crisis last year that caused these markets to dry up. Issuance of securities tied to consumer loans dropped to less than $8 billion in the final three months of last year, the Journal reported.