Feb. 3 (Bloomberg) -- Citigroup Inc. plans to use $36.5 billion to lend to consumers and companies and to fund U.S. mortgage loans after receiving $45 billion as part of the government’s bailout of the banking industry last year.

About $25.7 billion will be used for mortgages, $2.5 billion for consumer loans, $1 billion for student loans, $5.8 billion for credit-card lending and $1.5 billion for corporate loans, according to a report to be issued today by New York-based Citigroup. A copy was obtained by Bloomberg News.

Barney Frank, chairman of the House Financial Services Committee, has faulted banks for failing to boost lending after getting capital from the U.S. Troubled Asset Relief Program. He said yesterday that President Barack Obama will require banks to make more loans in return for aid. The Wall Street Journal reported today that Citigroup is now considering dropping a plan to spend about $400 million on marketing with the New York Mets baseball team. Some lawmakers say the deal is wasteful.

“The government, on behalf of the American taxpayer, has invested in Citigroup,” Chief Executive Officer Vikram Pandit said in the report. “We have an obligation to repay in ways that go well beyond the $3.41 billion Citigroup will pay the government each year in dividends associated with its TARP investment, and a separate loss-sharing agreement.”

The $36.5 billion in new funds allocated for lending comes on top of the $75 billion that Citigroup doled out in new loans in the fourth quarter to people and businesses.

‘A Step Forward’

“Today’s announcement by Citigroup is a step forward, but much more needs to be done to ease the credit crunch,” the Treasury Department said in a statement e-mailed to Bloomberg News. “We’ll soon be announcing a plan to strengthen our financial system in order to provide American businesses and families the credit they depend on, while strengthening transparency and accountability measures to be make sure taxpayer dollars are spent responsibly.”

Citigroup said in the report that TARP capital will not be used for compensation and bonuses, dividend payments, lobbying or government-related actions or any activities related to marketing, advertising and corporate sponsorship.

A government study showed that a majority of U.S. banks made it tougher for consumers and businesses to get credit in the past three months even as lenders received infusions of taxpayer funds.

Tighter Lending Standards

“About 65 percent of domestic banks reported having tightened lending standards on commercial and industrial loans to large and middle-market firms,” the U.S. Federal Reserve said in its quarterly Senior Loan Officer survey. “Large fractions of domestic banks continued to report a tightening of policies on both credit-card and other consumer loans.”

The U.S. economy continues to be hampered by a financial system that has lost more than $1 trillion on housing credits since the mortgage crisis began in 2007.

The Treasury has distributed more than $194 billion through its program of purchasing stakes in U.S. banks. It has also mounted rescues of Citigroup and Bank of America Corp., insuring a total of more than $400 billion of illiquid assets on their balance sheets.

To contact the reporter on this story: Josh Fineman in New York at jfineman@bloomberg.net.

Last Updated: February 3, 2009 12:53 EST