Watchdog: Banks Used $2.1B From Fund To Repay Aid

WASHINGTON (AP) â¿¿ A government watchdog says that 137 community banks bailed out in the financial crisis used $2.1 billion from a special fund to repay their federal aid instead of increasing their lending to small businesses.

A report issued Tuesday by the special inspector general for the Troubled Asset Relief Program says the bailed-out community banks didn't step up their loans to small business nearly as much as other small banks that weren't rescued. Some banks that used the small-business lending fund to repay bailouts didn't increase lending at all, while others increased loans to small business by 25 cents for every $1 from the fund.

Congress created the small-business lending fund in 2010 to encourage banks with less than $10 billion in assets to expand their lending to small businesses.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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