Efforts to raise the credit union MBL cap just received a boostin the form of a scathing quarterly TARP report released to Congress.

The Office of the Special Inspector General's report releasedWednesday was particularly critical of small and mid-sized banks'ability to lend to small businesses, which comes as IndependentCommunity Bankers of America members hike Capitol Hill this week tolobby against S. 2231.

“To the extent community banks in TARP continue to face asluggish recovery, non-performing assets, and capital-raisingchallenges, their lending to consumers – especially to smallbusinesses – will remain constricted,” the SIGTARP reportstated.

Banks with assets under $1 billion have steadily lost marketshare in small business lending since 1995, from 51% to 34%,according to research firm SNL Financial sourced by SIGTARP.However, during that same period, banks with more than $10 billionin assets doubled their small business lending market share.

While large banks have successfully exited the TARP program andreturned to “high-risk behavior”, the report said that “after3½ years, community banks have an uphill battle to exitTARP because they cannot find new capital to replace TARPfunds.”

Additionally, the report said nearly half of all community banksthat remain in the TARP program – 163 institutions – are notcurrent in making their dividends and interest payments. Of those,70 banks have missed six to nine payments as of March 31.

More than 400 banks of all asset sizes remain in the TARPprogram, and according to the report, the only successful exitprogram so far has been the Small Business Lending Fund, which “replaced TARP funds withother government funds.”

While SBLF required lending to small businesses in exchange forfederal funding, “it ended up being largely a program for cullingthe strongest banks out of TARP,” the report said.