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80% bailed out US banks lending more

More than 80 per cent of US banks that have been given government aid say it has led to increased lending.

A new study by the Office of Special Inspector General for the Troubled Asset Relief Program found that although most American banks didn’t separate or track TARP funds, most were able to provide insight to their general or planned usage.

More than 80 per cent of the banks surveyed said the TARP funds allowed them to increase lending for many different loans, such as residential, commercial, small business, credit card and more. Many banks stated that without the funds, lending would have been lower or come to a standstill.

However, although many banks cited lending as an important use of the funds, the amount of new lending that was a result of the TARP funding could not be gathered from their survey responses.

More than 40 per cent of banks said the funds allowed them to build up their capital reserves, which is required by regulators in order to absorb unanticipated losses.

About one-third of the banks said they used the funds to invest in agency-mortgage backed securities, which provided immediate support for lending and borrowing activities of other banks, as well as set the bank up for increased lending at a later time.

A smaller number of banks said they used the TARP funds to repay their own outstanding loans, to buy other banks or said they had not allocated the money yet.

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