Treasury Developing Tools to Track Lending

Kashkari said banks might use the money to shore up their balance sheets in addition to lending, particularly if they are forced to write down the value of loans they carry on the books. Last year, major financial institutions such as Citigroup (C Quote), Merrill Lynch and Morgan Stanley (MS Quote) booked billions of dollars of losses after mortgage-related securities they owned plunged in value.

President George W. Bush, acting at the behest of Obama, on Monday asked Congress to release the second $350 billion of the rescue fund, known as the Troubled Asset Relief Program, or TARP.

Larry Summers, Obama's choice for National Economic Council director, sought to reassure lawmakers in a letter Monday that the new president will impose tougher restrictions and oversight on how the money is spent.

"The president-elect has directed his Treasury Department to monitor, measure and track what is happening to lending by recipients of our financial rescue assistance," Summers wrote in his letter.

Kashkari said the government on Friday invested in 43 additional banks, bringing the total amount invested to $189 billion in 257 banks in 42 states and Puerto Rico.

In addition, the Treasury Department has opened the TARP to about 3,000 small community banks that weren't previously eligible to participate, he said.

The current administration already has committed more than the initial $350 billion of the rescue fund, using it to inject capital into banks with few strings attached and to bail out ailing financial companies considered too big to fail without further damage to the economy.