Banks used billions from a small-business lending program to repay government bailout funds, rather than for its intended purpose — making more loans to mom-and-pop operations, according to a watchdog report released Tuesday. The Small Business Lending Fund dished out more than $4 billion to 332 community banks, credit unions, and community development financial institutions to lend to Main Street businesses. By signing up for the lending program, banks could convert their TARP obligations into a lower-interest loan and escape restrictions on executive compensation. But in return, the banks were supposed to increase their lending to small businesses. Instead, 132 TARP recipients participating in the small-business program used about $2.1 billion they were awarded to exit TARP, rather than increasing lending, according to the report from the TARP special inspector general. “For some TARP banks, SBLF turned out to be little more than a TARP exit strategy,” said Christy Romero, special inspector general for TARP.

Six Ways Banks Can Defeat Hackers and Reduce Data Breaches

When it comes to dealing with hackers and data breaches, small banks have more to lose than big banks: They face an uphill battle to win back customer trust once it’s gone, and customer trust is a core value proposition for small and mid-sized banks. They also have fewer resources at their disposal than larger financial institutions. So how can small and regional banks reduce the risk of breach? Consider these six steps to jumpstart your bank’s security plan: 1) Manage information assets like all other assets; 2) Perform a security assessment; 3) Appoint a Security Officer; 4) Educated employees about security best practices; 5) Monitor social media exposure, and 6) Limit data access to only those who need to know.

Bluebird Gains FDIC Insurance

Skeptics who saw the seeds of an eventual bank charter in the advent of American Express and Walmart had a change of heart and last week announced that the jointly sponsored Bluebird prepaid card will carry FDIC deposit insurance. Dan Schulman, group president, enterprise growth at American Express, said, “Bluebird is designed to help make their everyday financial lives easier, more convenient, and less expensive. [This] announcement, which reflects feedback from consumers, advocacy groups, and government officials, represents the next set of enhancements that further distinguish Bluebird from other financial services options.” In another change, the company announced that Bluebird cardholders would be able to obtain checks for their accounts that the company will pre-authorize in order to prevent overdrafts.

PayDay Lending Drains Nearly $1 Billion from Communities

One of the worst ironies of the nagging economic recession is that consumers with the fewest financial resources have lost the most. Now, a new report finds that payday loans not only strip much-needed income from low-income families, but harms the economic viability of the communities where they operate, draining nearly $1 billion a year. Written by the Insight Center for Community Economic Development (Insight Center), it also reveals other net negative impacts of these small-dollar, high cost loans on economic growth and personal bankruptcy filings. The Insight Center examined the net economic impact of the $3.3 billion in interest that borrowers paid to non-bank payday lenders in 2011. The study found that if consumers collectively had an additional $3.3 billion in discretionary spending, it would have resulted in $6.34 billion in economic activity and created 79,000 jobs. In comparison, payday lending activity added $5.56 billion to the national economy and created 65,000 jobs. Combining these figures shows a net loss from payday lending of $774 million in economic growth and more than 14,000 jobs. That's in addition to $169 million lost through Chapter 13 bankruptcies.