July 19 (Bloomberg) -- Treasury Secretary Timothy Geithner should press banks for more information on how they use the more than $200 billion the government has pumped into U.S. financial institutions, according to a new oversight report.

When queried, banks are able to explain where the money goes in their businesses, said the report from Neil Barofsky, special inspector general of the Troubled Asset Relief Program, which covers a survey of the banks collected in March.

Barofsky’s survey collected information from 360 banks that have received TARP capital, including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. The responses, which the inspector general said it didn’t verify independently, showed that 83 percent of banks used TARP money for lending, while 43 percent used funds to add to their capital cushion and 31 percent made new investments.

Existing Treasury surveys of TARP banks’ lending don’t show enough about what the banks are up to, said the report by the independent inspector general, which is scheduled for public release tomorrow.

The Treasury’s approach “fails to recognize that TARP recipients do far more with their TARP funds than simply originating loans: They have also used these funds in a broader array of interrelated activities, as demonstrated in this audit, such as making investments, acquiring other financial institutions and simply maintaining the capital as a cushion against future losses,” the report said.

The Treasury questioned whether the report’s findings had broad implications for overseeing the TARP program, in an official response to the report that noted most banks don’t manage their TARP money separately from other funds.

“We think caution should be exercised in drawing conditions from this data,” said Herb Allison, the Treasury’s assistant secretary for financial stability. “Although it might be tempting to do so, it is not possible to say that investment of TARP dollars resulted in particular loans, investments or other activities by the recipient.”

The report doesn’t include the responses from individual banks. The inspector general’s office said it is reviewing the responses for proprietary information and expects to post the banks’ answers by mid-August.

To contact the reporter on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net;

Last Updated: July 19, 2009 00:01 EDT