Citigroup to Use $36.5 Billion of Funds for Expanding Lending

Citigroup to Use $36.5 Billion of Funds for Expanding Lending


Feb. 3 (Bloomberg) -- Citigroup Inc. plans to use $36.5 billion to lend to consumers and companies and to fund U.S. mortgage loans after receiving $45 billion as part of the government’s bailout of the banking industry last year.

The New York-based bank will use $25.7 billion for mortgage lending, $2.5 billion for consumer loans, $1 billion for student loans, $5.8 billion for credit card lending, and $1.5 billion for corporate loans, according to a report to be issued today by Citigroup and which was obtained by Bloomberg News.

Citigroup and other banks that received funds from the U.S. Troubled Asset Relief Program have been criticized by politicians including Representative Barney Frank for not using the money for making loans. President Barack Obama will require banks to boost lending to consumers and companies in return for taxpayer aid from the $700 billion bailout fund, in a departure from Bush administration policy, a key lawmaker said yesterday.

“The government, on behalf of the American taxpayer, has invested in Citigroup,” Chief Executive Officer Vikram Pandit said in the report. “We have an obligation to repay in ways that go well beyond the $3.41 billion Citigroup will pay the government each year in dividends associated with its TARP investment, and a separate loss sharing agreement.”

The $36.5 billion in new funds allocated for lending comes on top of the $75 billion that Citigroup doled out in new loans in the fourth quarter to people and businesses.

Citigroup said in the report that TARP capital will not be used for compensation and bonuses, dividend payments, lobbying or government-related actions or any activities related to marketing, advertising and corporate sponsorship.

Tougher Borrowing

The bank’s pledge to lend more comes as a government study showed that a majority of U.S. banks made it tougher for consumers and businesses to get credit in the past three months even as lenders received infusions of taxpayer funds.

“About 65 percent of domestic banks reported having tightened lending standards on commercial and industrial loans to large and middle-market firms,” the U.S. Federal Reserve said in its quarterly Senior Loan Officer survey. “Large fractions of domestic banks continued to report a tightening of policies on both credit-card and other consumer loans.”

The U.S. economy continues to be hampered by a financial system that has lost more than $1 trillion on housing credits since the mortgage crisis began in 2007.

The Treasury has distributed more than $194 billion through its program of purchasing stakes in U.S. banks. It has also mounted rescues of Citigroup and Bank of America Corp., insuring a total of more than $400 billion of illiquid assets on their balance sheets.

BLOOMBERG