Scrambling to ease the strain on the credit market, the Federal Reserve announced a $200 billion program on Tuesday that would allow financial institutions, including the nation’s major investment banks, to borrow ultra-safe Treasury money by using some of their riskiest investments as collateral. Wall Street responded with a rally, with the Dow Jones industrials surging 250 points.

The Fed normally lends Treasury securities to banks for just a few hours. Under the new program, money will be lent for 28 days and the central bank will accept nongovernment mortgage-backed securities — the source of the current crisis in the credit markets — as collateral.

The Fed will require that the assets, which are linked to soured home loans, have a premium credit rating. But the program will effectively allow some of the nation’s biggest brokerage firms to hand over potentially damaged securities to the government in exchange for the safest securities in the market.

Stock markets soared at the opening bell, with the Dow Jones industrials gaining 260 points, more than 2.2 percent, as brightened investors snapped a three-day losing streak. The Standard & Poor’s 500-stock index was up 2.1 percent, at 10:30 a.m., and the Nasdaq composite index gained 2.3 percent.

The Fed is hoping the new program, dubbed the Term Securities Lending Facility, will soothe the financial fears that have locked up the credit market. Banks, worried about new losses from soured securities, have been more reluctant to lend to businesses and consumers, effectively freezing up the nation’s economic bloodstream. An infusion of safe government money, the Fed reasons, will make it less risky to give out cash.

“If these institutions are able to extend out more credit as a result of this, it may take more pressure of the housing market and mortgage quality,” said Mark Zandi, chief economist at Moody’s Economy.com.

But Mr. Zandi said he was skeptical that the Fed’s actions would address the root of the current problems in the credit markets.

“I don’t think it helps determine the appropriate price for these securities,” he said. “It doesn’t solve the underlying problem of mortgage delinquencies and defaults, which could at some time threaten the Triple-A securities.”

The Fed will lend the Treasuries through weekly auctions that begin March 27. Federal agency debt and federal agency mortgage-backed securities — including those issued from Freddie Mac and Fannie Mae — will also be accepted as collateral.

It is the latest move in the Fed’s continuing campaign to shake out anxieties in the credit market. Last week, the central bank said it would offer up to $100 billion through a new auction program that allows financial firms to take out loans at wholesale rates.

On Tuesday, the Fed also increased currency swap lines with the European Central Bank and the Swiss National Bank, to $30 billion and $6 billion. That is an increase of $10 billion for the European Central Bank and $2 billion for the Swiss bank.