Citigroup, under pressure to increase its lending, says it will spend $36.5 billion to issue mortgages, make credit card loans and buy distressed assets in the tight credit markets in the coming months.

The decision arrives after the bank received $45 billion in capital from the federal government in two installments late last year, and taxpayers' questions mounted about the use of that money.

In a report reviewed by The Associated Press that Citigroup Inc. plans to release Tuesday morning, the bank detailed how it is boosting lending efforts by using funds from the Troubled Assets Relief Program, or TARP.

It's not that the $45 billion in TARP is being doled out by Citigroup directly to borrowers. Rather, having the extra capital allows the bank to borrow more money from various funding sources, and then lend that money out to others. A bank makes money by borrowing cheaply for the short-term and lending at higher rates for the long-term; if a bank has no capital, other institutions and investors won't lend to it.

So while Citigroup says it will deploy $36.5 billion in the coming months as a result of TARP, that figure could grow substantially should the funding markets improve.

"Our responsibility is to put these funds to work quickly, prudently and transparently to increase available lending and liquidity," said CEO Vikram Pandit in a statement included in the report.

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

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

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

Of the $25.7 billion Citigroup set aside for U.S. residential mortgage activities, $10 billion will go toward buying securities backed by mortgages that conform to Fannie Mae and Freddie Mac standards. Another $7.5 billion will be used to buy prime home mortgages in the secondary markets. The final $8.2 billion will be mortgages issued directly to aspiring homeowners — including mortgages with values that exceed the limits set for government-sponsored loans.

Citigroup will be making more loans than it would have without TARP, but said in the report it will not "take excessive risk with the capital the American public and other investors have entrusted to the company."

The bank will continue to read proposals for increased lending from its various divisions, and plans to issue quarterly reports on TARP use.

While TARP will be used to back lending efforts, Citigroup's expenses will come out of its cash flow, the bank said.

The government has used TARP money, in many cases, to buy preferred stock in banks.

Where TARP capital sits on banks' books, however, is just a technicality to many of Wall Street's critics, who have harshly excoriated banks for their spending decisions.

New York state Comptroller Thomas DiNapoli reported last week that Wall Street spent $18.4 billion on bonuses for 2008; President Barack Obama called the payouts "shameful."

Citigroup has been criticized for its corporate jets — most recently, the fact that Citigroup's former CEO Sanford "Sandy" Weill, as a consultant to the company, had a contract that allowed him to use the jet for personal trips. (Weill and Citigroup last year agreed to terminate his consulting contract in April, and Weill on Sunday night said in a statement he would immediately stop using the corporate jet.)

Citigroup's announcement about TARP use comes as the government tries to figure out how to help the nation's ailing banks so they can lend more. Treasury Secretary Timothy Geithner is expected to announce new plans for rescuing the financial sector in a speech next week.

Banks are not lending massively because of three factors: Demand for loans is down due to the weak economy; there are fewer creditworthy borrowers in the weak economy; and the loans the banks already hold are expected to bring big losses in the coming quarters.

This is why banks' cash balances have jumped by $800 billion to $1.1 trillion since August, pointed out Miller Tabak & Co. analyst Tony Crescenzi in a note last week. Crescenzi said the idea of a "bad bank," or "aggregator bank" — which would take the bad assets off banks' balance sheets — could encourage banks to boost lending.

Another option is having the Federal Deposit Insurance Corp. guarantee more securities issued by financial institutions.

The Federal Reserve in its quarterly survey of bank lending practices released Monday found that nearly 60 percent of banks said they tightened lending standards on credit card and other consumer loans, about the same portion as in the previous survey released in early November. About 80 percent of domestic banks said they tightened lending standards on commercial real-estate loans, slightly less than the roughly 85 percent that reported doing so in the previous survey.

In January, Citigroup reported a fourth-quarter loss of $8.29 billion — its fifth straight quarterly deficit — and announced that it would be splitting into two parts. One portion, Citicorp, will focus on traditional banking around the world, while the other, Citi Holdings, will manage the company's riskier assets and tougher-to-run ventures.

The company has also made some significant changes at the board level.

Robert Rubin, a former U.S. Treasury Secretary, in January said he would be retiring from Citigroup's board. Less than two weeks later, Win Bischoff, chairman since December 2007, announced his retirement, too. Longtime board member Richard Parsons, the former CEO of Time Warner Inc., became the new Citigroup chairman.