UPDATE 1-Bernanke-need for TALF programs still strong

WASHINGTON, Sept 25 - Federal Reserve Chairman Ben Bernanke said on Friday the need for Fed support for consumer and small business loans remains strong even as use of other financial backstop programs tapers off as markets regain balance after a wrenching crisis.

"Usage of many of these programs has been winding down as markets improve, but one program for which an ongoing need still clearly exists is the Term Asset-Backed Securities Loan Facility, or TALF," Bernanke told the Congressional Black Caucus Foundation.

He said the Fed has acted to ensure TALF borrowers include firms owned by women and minorities. Under TALF, investors borrow from the Fed to buy securities backed by consumer, student, small business and commercial real estate loans.

Interest rates on auto loans have gone down considerably since the start of TALF and autos has been one of the biggest categories of loans, Bernanke said in response to questions.

However, there have been problems in getting AAA-ratings for auto floor plan loans eligible for the program, he said. Such loans are typically used by dealers to acquire inventory.

"I am hopeful the situation in the auto companies is going to improve," Bernanke said.

The Fed chairman faces an unusually busy congressional agenda this fall. He must win Senate confirmation for a second four-year term as chairman and ensure congressional efforts to strengthen U.S. financial market supervision do not weaken the Fed or damage its independence.