The rubber is hitting the road, now that the government has begun doling out taxpayer funds to key banking institutions. Wells Fargo & Co. (WFC) got $25 billion from the U.S. Treasury yesterday, as the first of the $700 billion in U.S. Treasury funds was doled out to key banks, the bank said in a press statement. Wells Fargo issued 25,000 preferred shares at $1 million per share, under the Treasury's Troubled Asset Relief Program, or TARP. The shares pay a 5 percent annual dividend for the first five years, and 9 percent thereafter. The deal was announced after market close; Wells said the issuance also gave the Treasury warrants to purchase 110,261,688 shares of its common stock at an initial per share exercise price of $34.01 -- above the bank's $32.11 closing price on Wednesday. To put the warrants into perspective, given Wells' market cap of $106.64 billion on Wednesday, the bank has roughly 3.32 billion shares currently outstanding. The question now: will they lend? There has been a growing dust-up over the belief that many of the larger banks don't intend to use the capital to begin lending, but instead to bolster their own balance sheets against further market decline. Yesterday, Henry Waxman (D-CA), chairman of the House Committee on Oversight and Government Reform, said he is investigating executive compensation at the nine banks receiving the first round of Treasury funding; the investigation comes amid allegations that the TARP taxpayer funds will be used to pay outsized bonuses to banking managers. Wells' executives, for their part, were careful not to explicitly note that the Treasury funds would be used exclusively for lending activities. "We believe the Treasury’s plan is a positive step toward providing much needed capital for financial institutions in the best position to deploy it effectively to stimulate the U.S. economy and strengthen confidence in the U.S. banking system,” CFO Howard Atkins said in a press statement. Wells Fargo plans to raise an additional $20 billion of capital, primarily via common stock, as part of its pending acquistion of Wachovia Corp. (WB). “The combination of the market capital and the capital investment from the government will enable us to finance the Wachovia acquisition, to continue to build our franchise and gain market share as we’ve done throughout the credit crunch and to maintain one of the strongest balance sheets and highest capital ratios among U.S. financial services companies,” Atkins said during a third quarter earnings call. Shares in Wells Fargo were at $32.47, up 1.1 percent, in early trading Thursday. Write to Paul Jackson at Disclosure: The author held no positions in any of the stocks mentioned when this story was published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.