TARP banks report increase in loans

According to the survey by the Special Inspector General for the U.S. Treasury`s $700 billion Troubled Asset Relief Program, more than 80 % of the U.S. banks that received federal bailout funds said the money had helped them increase lending or avoid a drop in lending as the recession worsened earlier this year. The survey did not make public results from individual banks, partly to address their concerns about divulging business-sensitive information.

The survey revealed that nearly 40 % of the 360 banks surveyed had used some of the funds to build up capital cushions to absorb unanticipated losses. And a third of the institutions had invested some of the TARP money into mortgage-backed securities issued by Fannie Mae and Freddie Mac.

300 banks or 83 % used TARP funds to supplement lending activities. About 29 % of institutions used TARP funds to make residential loans, 18 % for commercial mortgages and 17 %for other consumer loans with TARP funds, such as auto loans and personal lines of credit. 40 % said they used TARP funds to bolster capital cushions, economic uncertainty was a key factor cited.

Another 52 institutions, or 14 % used the funds to pay off other debts because the government funding was more cost effective. 15 banks, or 4 % used TARP funds for acquisitions, mostly to take over failed banks at the request of the Federal Deposit Insurance Corp., the regulator that administers most bank failures.

Most TARP participants said they did not segregate the taxpayer funds from their other capital or borrowings.