“In these uncertain and difficult times, banks are inclined to hoard rather than to deploy capital,” charged Senator Charles Schumer.

Schumer said that when the Treasury Department comes back to Congress to release the final $350 billion installment of a $700 billion bailout rescue fund, he and colleagues want to require banks to do more lending. Congress can block the release of the funds or impose conditions on how they are used but would have to rewrite the law.

Congress is looking at making banks show they have increased their lending in order to share in the $350 billion phase two part of the bailout plan. Lawmakers already were looking at rewriting a portion of the legislation next week, in a lame duck session, to let the beleaguered auto industry have a $25 billion share of the money.

Treasury has so far has devoted $250 billion of the bailout money to buying equity in banks and another $40 billion to insurance giant American International Group Inc. The hope was that the infusion of news capital would enable them to increase lending, but so far that hasn't happened, lawmakers said at a hearing by the Senate Finance Committee Thursday.

Instead, some of the recipients of the money have continued to pay dividends to stockholders, provide pay raises and bonuses to executives and other employees and level takeover bids at other companies. Lawmakers said they want to impose restrictions on all those activities for companies getting bailout money.

Executives from four financial institutions that have received a total of $75 billion in federal bailout funds promised at the hearing that none of the aid would be used for paying executives and employees.

“The committee has asked whether (bailout) funds would be spent on executive compensation,” said Jon Campbell, regional banking president for Wells Fargo & Co. in his testimony. “The answer is no. Wells Fargo doesn't need the government investment to pay for bonuses or compensation.”