Report: U.S. banks misused TARP money

WASHINGTON, July 20 (UPI) -- Many U.S. banks that got federal bailout money misused it, a special inspector general overseeing the government's financial rescue program said Monday.

While most of the 360 banks surveyed said the Troubled Asset Relief Program money they got from Washington helped them make loans or avoid a drop in lending, 40 percent said they also used the money to shore up their capital to protect against losses, Neil Barofsky, the special inspector general, said in a report. However, TARP does not allow banks to recoup losses already incurred on troubled assets.

Some banks invested some of the cash, used it to pay off debts or buy other banks, Barofsky's report said, the Washington Post reported.

Barofsky, a former New York assistant U.S. attorney in a securities-fraud unit, said the Treasury should require banks to submit regular, detailed information about how they use the bailout money so that the public can see how their money is being spent.

But Herbert Allison, the assistant secretary of the Treasury who monitors TARP, said in a letter it was not possible to say exactly where TARP dollars have gone.

The Treasury Department does require 21 of the nation's largest banks to file public reports each month showing the dollar volume of their new lending.

Taxpayers have invested more than $200 billion in more than 600 banks under the program, which began in October.

Some banks have started to repay the aid even as others continue to apply for it, the Post said.