Financial institutions are being asked to track and report their use of government money received through the $700 billion bailout program, according to a Federal Deposit Insurance Corp. (FDIC) directive issued yesterday to about 5,100 state-chartered banks and savings and loans, the Associated Press reported.

The move comes after a congressional panel overseeing the Treasury Department’s Trouble Asset Relief Program (TARP) said in a report last week that the department failed to answer many of its questions relating to how banks are spending the money and the government’s overall strategy to rescue the economy.

Banks and other financial institutions will now be required to track how the federal money they receive helps them boost “prudent lending” and their efforts to help reduce foreclosures. The FDIC asked that this information be included in their periodic reports and financial statements.

Iowa Banking Superintendent Tom Gronstal said he believes it will take some time before specific tracking mechanisms are put into place.

“I would say it’s analogous to the Community Reinvestment Act, where insured institutions are required to show they are lending in the communities where they get their deposits from,” Gronstal said. “I expect the rules and the benchmarks will eventually look like the Community Reinvestment rules.”

The Iowa Division of Banking already analyzes the quarterly financial reports of the institutions it regulates, he said. “It’s just that (the Treasury Department is) going to develop some additional benchmarks related to lending and loan volume, and I suppose loan type, that they’re going to keep track of.”

In a statement from the Treasury Department’s interim assistant secretary for financial stability, Neel Kashkari said the department has been working with bank regulators to create a program that will measure the activities of banks that receive TARP funds and compare that data with institutions that have not received TARP capital.

Locally, Wells Fargo & Co. has received $25 billion from the $250 billion Capital Purchase Program, a part of TARP, and West Bank Bancorporation Inc. has received $36 million. Principal Financial Group Inc. has applied for up to $2 billion from the Treasury Department, but an official said last week that the company has not received approval yet.

The Capital Purchase Program allows eligible institutions to sell preferred shares, along with warrants for common shares, to the government. The shares pay 5 percent dividends for the first five years, and then the rate escalates to 9 percent.