The Federal Reserve is set to issue another round of cash-strapped Americans a new set of easy loans, one that could bring tens of billions to the coffers of those with the lowest incomes.
The Fed will soon begin accepting cash-backed loans from banks in the US, Australia and Canada.
It will give borrowers $20,000 to spend on food, clothing, utilities, health care and other necessities, along with other basic items.
The program, known as a TANF, is intended to ease the financial burdens of Americans struggling with unemployment, poverty and the effects of sequestration, the economic impact of which is still unclear.
The money will be available to households who earn less than $40,000 a year, or about $1,200 per month for an individual.
They would have to apply for and pay for a new TANf loan, a process that takes three to four months, with a minimum loan payment of $1.25.
The new cash-back program comes as the US economy continues to falter.
The US unemployment rate hit a seven-year low in December, but it has held steady at 5.9 percent, according to the Bureau of Labor Statistics.
The government says the unemployment rate for adults aged 16 to 64 fell to 5.6 percent last month from 6.9.
The $20 billion cash-out will help the average American, the largest slice of the US workforce, who makes less than 50 percent of the federal poverty line.
It also represents a return to the $1 trillion in TANFs issued during the height of the recession in 2008.
The move by the Fed comes as a federal court has temporarily halted implementation of the sequester cuts that have taken effect in January, but that ruling has been overturned by a federal appeals court.
That means the new program will continue.
Under the program, households earning less than about $40.40 a month would receive a $10,000 cash loan.
For an individual making between $40 and $64, the TANfs would be available for $3,500 a month.
For households making between 65 and 94, it would be $6,000.
The TANflans are not tied to any specific income levels.
The program would apply to any household, not just those making below the poverty line or making less than the official poverty line, according the Fed.
Under its terms, the program will offer only $5,000 in cash for food and $2,000 for clothing.
It would also offer the following:A $2 monthly mortgage payment, which can be forgiven if the household makes monthly payments of $200 or less; a $1 per month rental payment; and a $2 per month utility bill payment.
The total monthly payment amount would be equal to $20 a month, or $2.20 per month.
The amount the program provides is also dependent on the income of the household.
The Fed says that in families making less, the cash-equivalency rate for a single person with no children would be 25 percent.
That rate is a lot lower for a family of four, according for the program’s eligibility requirements.
The Federal Reserve’s new TANS program will come with one important caveat: If the borrower falls below the official unemployment rate, the Federal Reserve will make the remaining cash available for that household to pay rent, utility and food bills.
If the household falls below that rate, however, the Fed will not make the cash available to pay other bills.
The current program will only apply to households that have a credit rating of AA or higher.
The new program is expected to apply to a much wider range of households, including those with lower credit scores.
The first $10 million of the program would be distributed to low-income households.
A $5 million loan would be given to households earning at or below 133 percent of poverty.
The $10 billion cash program would provide $20 for every $1 of income.