The part aimed at boosting consumer and business lending is being extended through March. The part geared toward boosting new commercial real estate lending will run through June, because of the extra time typically needed to complete such deals. Delinquency rates on such loans have soared as companies have downsized or closed their doors, the Fed has said.

TALF was created in March, part of the efforts by the Fed and the Obama administration to ease credit, stabilize the financial system and fight the recession. Under the program, the Fed allows for low-rate financing for investors to buy securities backed by credit card debt, auto loans, student loans and loans to small businesses. The market for such loans essentially froze up last fall with the eruption of the worst financial crisis since the Great Depression.

The program has the potential to generate up to $1 trillion in lending, according to the government. But participation has been scant: As of Aug. 12, the value of loans outstanding stood at just $29.6 billion.

Many economists said the market for securities backed by consumer and business loans has improved only slightly with TALF. Still, they say the Fed should continue the effort.

“Asset-backed securities are a key way for investors to supply credit to U.S. households and businesses, and that method was essentially shut down when the financial crisis hit last year,” said Mark Zandi, chief economist at Moody’s Economy.com. “If we can’t get the credit markets restarted, the economy won’t be able to recover.”

Zandi said the Fed could extend TALF further next year. Still, he and other economists said the severity of the recession continues to weigh on lending. The downturn has led banks to tighten lending standards to guard against further losses. The recession also has depressed consumer spending and business expansion, further dampening loan demand.

“There is no doubt that credit standards remain tight, the commercial real estate market is under stress and the asset-backed paper market is still gummed up,” said Sal Guatieri, an economist at BMO Capital Markets.

The Fed on Monday also extended until March 31 TALF loans that support existing commercial mortgage-backed securities. Businesses use these loans to finance such activities as buying shopping centers and other real estate. The Fed extended the program for new loans in this category until June 30.

Economists said any help for commercial real estate is vital because of the rising defaults. Small and regional banks face the greatest risk of losses from commercial real estate loans. Federal regulators on Friday announced the biggest bank failure this year, the collapse of Montgomery, Ala.-based real estate lender Colonial BancGroup Inc.

“Many smaller banks are still in deep trouble,” Zandi said.

Jeffrey D. DeBoer, president of the Real Estate Roundtable, praised the Fed’s decision. He said the action “sends a clear signal to markets that the Fed and the Treasury understand the gravity of the problem in commercial real estate credit markets.”

Among the problems that have held back TALF are rule changes and fear among participants that they might become ensnared in an anti-bailout backlash from the public and Congress.

In a joint statement with Treasury, the Fed said even though TALF is being extended, the two agencies decided against expanding it to allow other types of collateral to be used for loans. The agencies said this decision could be reversed if market conditions do not improve in coming months.

The Fed last week delivered a vote of confidence in the economy, saying the downturn appeared to be “leveling out.” Fed officials also said they would slow the pace of a program to buy $300 billion worth of Treasury securities, an effort aimed at keeping mortgage rates affordable. The central bank said it planned to shut down this program at the end of October, the first program it has moved to close since the credit crisis first hit.

Monday’s announcement was a signal that the Fed wants financial markets to know it’s closely monitoring emergency credit programs.

“This action reflects the Fed’s view that the economy is stabilizing, but it is far from a durable recovery,” Guatieri said.

Also Monday, the Fed said most banks expect their lending to remain tight through the second half of 2010, though mortgage standards already are loosening a bit.

The Fed’s latest survey of loan officers found that about 20 percent of U.S. banks tightened their lending standards on prime home mortgages in the April-June quarter, down from about 75 percent a year ago. Around 35 percent of U.S. banks reported tightening their lending standards for credit cards, down from around 65 percent a year ago.

Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities, said “the credit freeze is at least moving in the direction of a thaw.”