Executives from the nation’s top banks told the House Financial Services Committee on Wednesday that the government’s $700 billion Troubled Asset Relief Program – which was intended to use tax-payer dollars to help rescue distressed financial institutions – is working, despite criticism that it has done little to encourage banks to lend (“Bank CEOS Tell US House Panel They’re Lending,” Dow Jones Newswires, Feb. 11, 2009).

Recent reports show that banks are continuing to tighten their credit standards, despite receiving nearly $200 billion in TARP funds this year. Following media reports that TARP-assisted banks paid out extravagant bonuses to their executives and held conferences at lavish hotels, Congress and taxpayers, who have struggled to keep their homes and qualify for all types of loans, have demanded to know how the TARP funds were being spent.

“I urge you strongly to cooperate with us,” said House Financial Services Committee Chairman Barney Frank. “There is substantial public anger,” and relieving the anger “is essential.”

Executives from eight major banks told the House panel that they are using TARP funds to get credit flowing again.

Bank of America Chairman and CEO Kenneth Lewis said, “Make no mistake: We are still lending, and we are lending far more because of the TARP.” While JPMorgan Chase CEO James Dimon told lawmakers that during the last quarter of 2008, the bank “lent more even as customers cut back on their spending.”

What Banks Say They’re Doing to Restore Public Confidence

Bank executives have said they plan to repay the government for the aid money before 2012. Bank of America will make its first dividend payment of more than $400 million to the Treasury Department next week and said it plans to pay the department a total of $2.8 million in dividends this year.

Citigroup CEO Vikram Pandit said he will take a $1 salary and forgo his bonus until the bank returns to profitability.

And some executives have said that they would consider suspending foreclosures until President Barack Obama unveils a plan that would help struggling homeowners avoid foreclosure. “If we could put a timeframe on it, we would do it,” Lewis said. Pandit said he was also committed to helping troubled homeowners.

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