The inspector general who oversees the rescue program said Monday that the Treasury Department gave misleading statements about the health of the initial large banks in which it invested capital.

In a report to Congress, Inspector General Neil Barofsky said the Treasury labeled all of the initial nine banks to receive Troubled Asset Relief Program funds as "healthy." Yet, Barofsky said the government had concerns at the time over the health of several of those firms.

"By stating expressly that the 'healthy' institutions would be able to increase overall lending, Treasury may have created unrealistic expectations about the institutions' condition and their ability to increase lending," Barofsky wrote.

Barofsky cited Bank of America Corp., which received $15 billion from Tarp initially and an additional $10 billion from its merger with Merrill Lynch & Co. But B of A later required an additional $20 billion from Tarp — proof it was not "healthy" at the time the initial government investment was made, Barofsky said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.