The gift of TARP keeps giving at Citigroup

NEW YORK (CNNMoney.com) -- Citigroup said Tuesday it provided $6 billion in new loans backed by taxpayer money in the latest quarter, with most of those funds going to state and local governments and propping up the housing market.

Offering its latest glimpse into how it is spending the $45 billion in government bailout money, Citigroup (C, Fortune 500) said it provided $4 billion in letters of credit to a variety of public agencies.

An additional $2 billion went to provide financing to mortgage originators, with the ultimate aim of increasing available credit for new homebuyers and existing homeowners looking to refinance their existing mortgages.

More than half of the money Citigroup has deployed as a result of the Troubled Asset Relief Program, or TARP, has gone toward buying mortgage securities in the secondary market.

"Our efforts have enabled businesses to keep their doors open, spurred job creation in communities and provided families with access to additional funds at times when they've needed it the most," Citigroup CEO Vikram Pandit said in a statement.

Banks' willingness to lend became a focal point in the ongoing crisis after the U.S. government provided them with more than $200 billion in funds in an effort to get credit flowing again.

Citigroup, which has been under heightened scrutiny since becoming one of the biggest recipients of taxpayer aid earlier this year, said that the amount of lending activity to consumers jumped 22% in the latest quarter, compared to the first three months of the year.

Commercial lending, or loans to businesses, on the other hand, contracted modestly in the quarter, as the company cited weakened demand for credit.

Since first taking hold of government funds last fall, Citigroup has authorized $50.8 billion in loans and other commitments backed by TARP, the company said Tuesday.

That amount however, does not necessarily suggest that nearly all of the $45 billion in taxpayer aid Citigroup received has been spent. Experts have indicated that capital injected into banks tends to have a multiplier effect. So for every dollar of government capital, banks are able to make $10 in loans.