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Citigroup details plans to raise lending after TARP payouts

CITIGROUP, under pressure to increase lending, is to spend US$36.5 billion to issue mortgages, make credit card loans and buy mortgage-backed securities.

The bank received US$45 billion from the federal government last year and there had been questions about the use of that money.

In a report due for release yesterday Citigroup will detail how it is boosting lending efforts by using funds from the Troubled Assets Relief Program, or TARP. It's not that the US$45 billion in TARP is being doled out directly to borrowers. Rather, having the extra capital allows the bank to borrow more from various funding sources, and then lend that money to others.

"Our responsibility is to put these funds to work quickly, prudently and transparently to increase available lending and liquidity," said CEO Vikram Pandit.

"TARP capital will not be used for compensation and bonuses, dividend payments, lobbying or government relations activities, or any activities related to marketing, advertising and corporate sponsorship," Pandit said.

After considering US$51.2 billion worth of proposals from its various arms, the bank said it approved US$36.5 billion. That includes US$25.7 billion in United States residential mortgage activities, US$5.8 billion in credit card lending, US$2.5 billion in personal and business loans, US$1.5 billion in corporate loan activity and US$1 billion in student loans.

The US$36.5 billion deployment is in addition to the US$75 billion in new loans Citigroup made in the fourth quarter. It also does not include the US$10 billion Citigroup used in November to buy pools of mortgages secured by Fannie Mae.

Of the US$25.7 billion Citigroup set aside for US residential mortgage activities, US$10 billion will go toward buying securities backed by mortgages that conform to Fannie Mae and Freddie Mac standards. Another US$7.5 billion will be used to buy prime home mortgages in the secondary markets. The final US$8.2 billion will be mortgages issued directly to aspiring homeowners.


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