Washington  - US government officials warned they may need even more money to stabilize the country's crumbling financial sector as they launched a new
1-trillion-dollar programme Tuesday designed to unfreeze credit markets.

The US Treasury and Federal Reserve said they would begin directly lending up to 200 billion dollars by March 25 to help restart securitization markets, a critical component of the struggling US economy that provides loans for small businesses, cars, student tuition, credit cards and other core sectors.

The programme will be increased over time to 1 trillion dollars, using a combination of taxpayer funds and central bank reserves.

Federal Reserve Chairman Ben Bernanke, in testimony before Congress, said securitization markets had ground to a halt since the financial crisis exploded in September.

The Term Asset-Backed Securities Loan Facility (TALF) would have "immediate benefits" for the kinds of securitized loans that many US businesses rely on for their daily operations, he told the Senate Budget Committee.

The new initiative comprises one half of President Barack Obama's 2-trillion-dollar effort to end the US financial crisis that has led the wider economy into a deep recession.

The Obama administration has also said it will create a 1- trillion-dollar public-private partnership to inject cash into key financial institutions in danger of bankruptcy.

Treasury Secretary Timothy Geithner said the latter effort could require Congress to approve additional funds, beyond a 700-billion- dollar financial rescue package already approved in October.

"As expensive as it already has been, our effort to stabilize the financial system might cost more," Geithner told the Budget Committee of the House of Representatives.

Obama, in a budget outline released last week for 2010 and beyond, included 750 billion dollars more to keep key banks from going under. The administration called it a "placeholder" and has not yet formally asked Congress for the extra funds.

Both Bernanke and Geithner insisted that, regardless of a public outcry over the bail-out of Wall Street banks, stabilizing the financial system was the only means of pulling the US out of a deep recession.

The world's largest economy contracted 6.2 per cent in the fourth quarter of 2008. (dpa)