The Troubled Assets Relief Program (TARP) places more burdens on small banks than on big ones, exacerbating the difference between financial institutions that are too big to fail and the rest, Congressional Oversight Panel Chairwoman Elizabeth Warren told CNBC Wednesday.
The Treasury said in a statement that around 700 small banks received TARP money and more than 98 percent of anticipated dividends were received, making $9 billion for taxpayers so far.
But small banks are still struggling, Warren said.
"It took them more than a year to get the money, they had very low participation rates, have problems paying it back," she said.
One in seven small banks that took TARP money has already missed a dividend payment, and fewer than 10 percent have repaid the amount back to taxpayers, a Congressional Oversight Panel report released Wednesday showed.
Small banks and big banks did not "look like each other" even before the need for the bailout and "in a post-TARP world, they look even less like each other," Warren said.
"I think that the problem is that small banks needed a different program… small banks serve an important function in this economy, they disproportionally are the banks that lend the money to small businesses," she said.
Warren estimated that 15 percent of the smaller banks cannot make the payments under TARP.
Coming losses in the commercial-real-estate sector will exacerbate the problem that small banks face, and the fact that the TARP premiums will increase over the next years will add to it, she said.