OTTAWA - The federal government is buying up $25 billion in residential mortgages to give Canada's chartered banks more cash for loans, but the effort shouldn't be considered a bailout similar to the U.S. government lifeline for Wall Street banks, the federal government and industry watchers said Friday.

"It's a huge stretch to look at it as a bailout - it's a helping hand," said Brad Smith, a banking analyst at Blackmont Capital, a Toronto brokerage.

The extraordinary measure announced by Finance Minister Jim Flaherty means the federal government and the Bank of Canada will have injected a whopping $45 billion in additional cash into the financial system in an effort to counteract the tight credit squeeze that has paralysed markets throughout the world.

On the campaign trail, Prime Minister Stephen Harper said the mortgage transfer is sensible and risk-free for taxpayers since the government is buying mortgages it already insures through the Canada Mortgage and Housing Corp.

"This is not a bailout of banks; this is a market transaction that will cost the government nothing," Harper said at a campaign rally.

"We are not going in and buying bad assets. What we are doing is simply exchanging assets that we already hold the insurance on. The issue here is not protecting the banks. The issue here is ensuring that there will be credit available from those banks to the wider borrowing public."

NDP Leader Jack Layton criticized the plan as a gift to the financial industry, a move that won't help ordinary consumers struggling to cope with a weaker economy and growing job insecurity.

"Now we learn that the banks are in the process of getting a multibillion (dollar) bailout from the government with no explanation," Layton said at a campaign stop in Toronto." Just out of the blue.

"It shows that Mr. Harper and his team are making this up as they to along."

Smith said the Flaherty announcement was a far cry from the US$700 billion government bailout designed to rescue the struggling U.S. financial sector. In that case, government is acquiring hundreds of billions of dollars of worthless mortgages from bank balance sheets, hoping to sell them at a profit in future when U.S. house prices recover.

"The word 'bailout' presumes so many things," he said. "It presumes success . . . it sounds like you give them (the money) and all the problems are gone."

Instead, he suggested the move was a way to accelerate mopping up some of the troubles that face the Canadian banks' balance sheets and get credit lending back to more normal levels.

Earlier Friday, Flaherty also insisted the government is not bailing out the banks, nor will Ottawa take on risky loans.