The Treasury agreed to the request, sending $ 1m to Mainstreet Bank in Ashland, Missouri, to help it stay afloat.
However, chairman Darryl Layne Woods then took more than a third of that money and bought a luxury waterfront home, with three bedrooms and two bathrooms, in Florida.
On Tuesday, Woods, who was also chief financial officer of Mainstreet, pleaded guilty to misleading federal investigators about his use of Troubled Asset Relief Program (Tarp) funds.
“At a time when many other Americans were losing their homes, he was siphoning off public funds to buy a luxury vacation condo in Florida,” said Tammy Dickinson, the US attorney for the Western District of Missouri.
“These federal funds were intended to help stabilise the economy during a fiscal crisis. Instead, this disgraced business leader took advantage of the situation to benefit himself and other bank executives, then lied to federal investigators in an attempt to hide his scheme.”
Prosecutors accused Woods of covering up the purchase of the $ 381,500 home when he replied to an investigator’s letter in 2009 that asked how the Tarp money was spent .
“We are a small central Missouri community bank and while I would like to be able to provide you with very specific and quantitative responses, we are currently operating under the assumption that the worst scenario could occur and the Tarp proceeds will provide vitally needed infusions to a bleeding patient,” Mr Woods wrote to Neil Barofsky, the head of the special inspector general for the Troubled Asset Relief Program (Sigtarp).
A sentencing date for Woods has yet to be scheduled but he could face up to a year in prison and a $ 100,000 fine. He is also banned from further involvement in banking.
Court records do not say if he will be charged with misusing the Tarp money.