Treasury Secretary Timothy Geithner issued new guidelines yesterday aimed at eliminating the influence of lobbyists on the $700 billion financial bailout program by restricting their contact with officials who are reviewing applications for money and deciding how to disburse it.
Treasury officials will also seek to limit political influence over the funds, saying they will use similar restrictions that forbid such influence in tax matters as a model. The department's Office of Financial Stability will be required to certify to Congress that each government investment is based solely on objective criteria.
As part of that effort, only banks recommended by their primary regulator will be eligible for capital investments.
"American taxpayers deserve to know that their money is spent in the most effective way to stabilize the financial system," Geithner said yesterday. "Today's actions reaffirm our commitment toward that goal."
It remains unclear, however, how the Treasury Department will implement the new changes and on what timetable. The Treasury did not detail how it plans to limit lobbyists' contact with decision-makers. It also offered few specifics about how the agency will prevent politics from playing a role in the bailout process, or precisely how it will create a transparent and objective application review structure for troubled banks.
A Treasury official acknowledged yesterday that the administration cannot stop individuals from trying to lobby the Treasury or other federal regulators, but that attorneys are working to develop the strictest limits allowed by law. In addition, the agency said, a log of communications from public officials and others regarding specific financial institutions would be posted on the Treasury's Web site and updated weekly.
Some in the lobbying community worry that the new measures will go too far.
"I understand what they're trying to do, but this just probably causes more harm than good," said Scott Talbott, chief lobbyist at the Financial Services Roundtable, which represents large banks and insurance companies. He said a main role of lobbyists is to help educate decision-makers. But the new restrictions, he added, "limit the flow of information at a time when it is most crucial."
Stefan Passantino, a partner at the law firm of McKenna Long & Aldridge, listened in yesterday to a conference call of lobbyists from around the country. The burning question, he said, is what can they do now to advance the interest of their clients.
"Although I understand it completely from a political standpoint," Passantino said, "it strikes me as not a wise way to go from a policy standpoint."
He said lobbyists play a valid role providing input to those in power, and that to forbid it would result in less informed decisions and limit the right of private citizens to petition the government.
"It's much easier to campaign on large black-and-white platitudes than it is to govern on those large, grand pronouncements of policy," he said. "And I think this is an example of that."
By contrast, Ryan Alexander, president of Taxpayers for Common Sense, a nonpartisan budget watchdog, called the new rules a good first step. "The spirit behind these rules are definitely the right spirit," she said. "But until we know exactly what this means, it's hard to know whether it goes far enough."
Despite initial pledges of transparency and rigorous oversight from the Bush administration and, in particular, from former Treasury Secretary Henry M. Paulson Jr., the process of spending the first half of the bailout funds has been criticized by lawmakers and oversight officials as an opaque undertaking that has played out mostly behind closed doors.