WASHINGTON -- The US Treasury and the Federal Reserve on Tuesday formally launched a program designed to pump $200 billion into consumer credit through the purchase of securities linked to various loans.

The program, which could rise up to $1 trillion, aims to break a credit crunch by buying up asset-backed securities linked to credit cards, auto loans and other types of consumer credit.

Federal Reserve Chairman Ben Bernanke testifies before the Senate Budget Committee on Capitol Hill in Washington March 3, 2009. [Agencies]

Called the Term Asset-Backed Securities Loan Facility (TALF), the program is designed "to catalyze" credit markets that have been "virtually shuttered since the worsening of the financial crisis in October," according to a joint Treasury and Fed statement.

"By reopening these markets, the TALF will assist lenders in meeting the borrowing needs of consumers and small businesses, helping to stimulate the broader economy," the statement said.

The program, which was announced last November, aims to help unfreeze the so-called securitization of the securities that are issued to provide credit for auto, student, small business and credit card loans.

The Federal Reserve Bank of New York will lend up to $200 billion to eligible owners of these asset-backed securities with a AAA credit rating, freeing up credit for additional loans.

The TALF along with other prgorams are aimed at easing a squeeze in credit due to a lack of confidence in various securities tied to consumer and home loans.

The TALF program will hold monthly fundings through December 2009 or longer if the Federal Reserve Board chooses to extend the facility.

The Fed has also ramped up purchases of mortgage securities that have also been frozen and which were squeezing available credit and worsening the economic downturn.