Dallas / Fort Worth Local News

WASHINGTON (CBS News) ― The government has introduced a pair of new programs that will provide $800 billion to help unfreeze the market for consumer debt which Treasury Secretary Henry Paulson calls vital to supporting the economy.

The Federal Reserve says it will buy up to $600 billion in mortgage-backed assets in another attempt to deal with the financial crisis.

The Fed says it will purchase up to $100 billion in direct obligations from mortgage giants Fannie Mae and Freddie Mac as well as the Federal Home Loan Banks. It also will purchase another $500 billion in mortgage-backed securities - pools of mortgages that are bundled together and sold to investors.

The government also announced it is readying a program to aid companies that issue credit cards, make student loans and finance car purchases.

Paulson says key markets for consumer debt essentially came to a halt in October.

"As a result, millions of Americans cannot find affordable financing for their basic credit needs," Paulson said. "Credit card rates are climbing, making it more expensive for families to finance everyday purchases. This lack of affordable consumer credit undermines consumer spending and as a result weakens our economy.

"Remember that $200 billion is a starting point," Paulson said. "It's going to take a while to get this program up and going and then it can be expanded and increased over time."

The government, while looking to reduce fear in the credit markets, is eager to see lenders resume more normal levels of lending to help stimulate the economy. Since September, when credit markets first froze, financial institutions have been hesitant to hand over money for fear they won't be repaid. That, in turn, has made it harder for businesses and consumers to borrow.

Janet Rone is also a realtor who is looking to benefit personally and professionally. She knows a slight percentage drop can allow her family to find the type of house they want closer to their price range. As the holidays approach, it couldn't have come at a better time.

"Everybody wants a cheaper interest rate and have a manageable payment, so I think every percentage point helps," says Rone, who is currently renting a house in Lakewood with her husband and two children.

But analysts say the window of opportunity for homeowners to refinance existing mortgages or for people to buy at a good rate may close as quickly as it opened.

"It can be a significant amount for a lot of people. It can be anywhere from $100 a month to $500 or $600 a month," said Rodney Anderson, a Dallas lending company owner.

CBS News correspondent Claire Leka reports it's a change of direction for the Treasury Department, which initially planned to use the $700 billion bailout package to buy distressed assets from banks, but then later decided to concentrate on pumping money directly into banks and other financial institutions.

"The economy is suffering greatly because consumer spending makes up more than two-thirds of the economy," Leka said. "If consumers can't spend money, the economy is grinding to a big halt, and they want to change that."

"It's not clear if it's enough," Tourno College economist Peter Sperling told CBS News. "We'll just have to wait and see what it does in freeing up credit. But it's presumably in the right direction, and it's acting on the right types of loans."

And it was news Wall Street wanted to hear, extended its advance to a third day. In early trading, the Dow Jones industrial average rose 112.06, or 1.33 percent, to 8,555.45. The blue chip index rose 891 points on Friday and Monday.

The government's decision overshadowed a report that the nation's gross domestic product declined in line with expectations.

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.

And the credit pinch is being felt outside the U.S.: According to the British Banker's Association, the number of new home mortgages approved in the U.K. was 52 percent lower in October than in October 2007.

The Fed said that the $600 billion effort to support the mortgage market was being taken to reduce the cost of home mortgages and increase their availability. It said the purchases of the mortgages and mortgage-backed securities would take place over a number of months.

The severe financial crisis that is rocking global markets at the moment began more than a year ago with rising defaults on subprime mortgages, loans provided to borrowers with weak credit histories.

The billions of dollars of losses financial institutions have suffered on their mortgage loans have caused banks to stop making new loans of various types, which almost certainly has helped push the country into a deep recession.

But while these moves are intended to stabilize banks and thaw the frozen flow of credit, USC business professor Lawrence Harris told CBS News correspondent Larry Miller, "There's simply no sense extending credit to people if they can't pay off the credit they already have."

(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)