A new audit of 360 banks that received government bailout funds found that 83% of them used at least some of the money for lending -- a key objective of federal policymakers.

The audit was mandated by Congress and will be formally sent to lawmakers on Monday. It was completed by the Special Inspector General of the Troubled Asset Relief Program, or TARP, which surveyed banks that had received TARP investments from the Treasury Department as of Jan. 31. 

The audit shows the banks used TARP funds for multiple purposes:  300 firms [83%] reported they used TARP money to support lending activities, including making residential mortgages, consumer loans and small business loans; 156 banks [43%] said they also used the funds to improve their capital positions; 110 firms [31%] reported they used if for investments, such as in securities backed by mortgages or in municipal securities; 52 companies [14%] said they used it to repay their own debts, and 15 firms [4%] said they used TARP cash to make acquisitions, in some cases in mergers of weaker banks arranged by government regulators.

In a section that should please TARP’s architects, who created and launched the program last fall at the height of the credit crisis, auditors wrote, “Some institutions reported that, without TARP funds, lending activities would have come to a standstill or would have been curtailed.”

But there are less-favorable things as well. 

In TARP Special Inspector General Neil Barofsky's testimony for Tuesday on Capitol Hill, he's slated to say that Treasury "has failed to adopt recommendations that SIGTARP believes are essential to providing basic transparency and fulfill Treasury’s stated commitment to implement TARP ‘with the highest degree of accountability and transparency possible.’…Treasury’s default position should always be to require more disclosure rather than less and to provide investors in TARP -- the American taxpayers -- as much information about what is being done with their money as possible…”

As of the end of January, the Treasury Department had invested about $200 billion of TARP funds in banks. The money was part of the $700 billion in TARP authorized by Congress in October; the government also used TARP to support troubled insurance giant American International Group (AIG), as well as the auto industry and other firms. Since January, Goldman Sachs (GS), JPMorgan Chase (JPM) and more than 30 other firms have repaid about $70 billion of their TARP investments.

See our TARP page for the latest videos and stories on the program.

The 40-page audit noted that TARP recipients were not required to segregate TARP cash or to report their specific uses for the funds. But the report said 43 banks segregated their TARP money from other bank funds anyway.

Barofsky recommended that the Treasury Department require TARP banks to submit periodic reports on their uses of the funds.  He said 100% of the banks surveyed responded to his request for information and that 98% of them were able to “describe wide ranging uses of their funds.”

Barofsky also said that the assistant Treasury secretary in charge of TARP questioned the survey results, reporting he “suggested caution in drawing conclusions from this data, noting that ‘although it might be tempting to do so, it is not possible to say that investment of TARP dollars resulted in particular loans, investments or other activities by the recipient.'"

7-21-09 SIGTARP Testimony

5-5-09 Issa Letter to Geithner- TARP Transparency 

7-21-09 Republican Briefing Memo - SIGTARP Report

SIGTARP Use of Funds Audit