The Federal Deposit Insurance Corp. is under pressure from Congress to show how the more than 5,000 banks it regulates have used $350 billion they’ve received in government aid to help homeowners avoid foreclosure, reports The Wall Street Journal (”FDIC Pushes Banks for Reports on Use of Government Aid,” Jan. 12, 2009).

The FDIC is asking banks that have received government aid through the Troubled Asset Relief Program to provide information on how they’ve used the liquidity, debt guarantee, or capital injection programs offered by the Federal Reserve, Treasury Department, and FDIC to “prudently support credit needs in their market and strengthen bank capital.”

To help these FDIC-supervised institutions show more accountability, the agency is encouraging them to establish a monitoring process that would document how they are using their TARP funds. State banks are even being asked to include information on how they’ve spent the federal money in their published annual reports and financial statements.

Critics of TARP – which has injected half of its $700 billion in government aid into banks and other ailing financial companies – accuse banks of “hoarding the money,” while lenders counter that they’re simply being cautious given the worsening economic downturn.

As Congress pushes for more transparency in TARP, it is planning to impose greater limitations on how banks can use their TARP funds, and the Obama administration is considering new ways of tracking banks’ use of this money before the remaining $350 billion in TARP funds is distributed.

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