- The Washington Times - Wednesday, January 28, 2009

Lobbyists, a favored target of the Obama administration, questioned new proposals Tuesday that would restrict them from playing a role in how federal bailout funds are applied for or distributed - one of a handful of new restrictions announced by the Treasury Department.

An outline of the rules, with few details, was released in response to concerns that recipients of billions of dollars in federal bailout funds aren’t using the money to increase credit in the market, as it was intended, but for other purposes, including possibly lobbying.

Treasury Secretary Timothy Geithner, shortly after he was sworn in Tuesday, said the department will implement “safeguards” to prevent lobbyists and special interests from influencing the federal bailout.

Recipients of the first round of federal bailout money, designed to infuse equity into financial institutions to strengthen them, were given few restrictions. Now they face a growing chorus of criticism for how they have spent money since receiving the help.

The Washington Times reported last week that 18 of the 20 largest recipients of federal bailout money have continued to lobby the Treasury and other federal agencies, as well as Congress and the White House. Those companies spent a combined $12.2 million in lobbying in the fourth quarter of 2008.

Lobbyists say their industry already discloses its activities extensively and that the proposal would make it more difficult for companies to apply for federal assistance.

“How many times do lobbyists have to file a year? We’re one of the most transparent industries out there,” said Dave Wenhold, president of the American League of Lobbyists and founder of Miller/Wenhold Capitol Strategies.

He called the new restrictions on lobbyists a diversion from deciding what to do with a second round of Troubled Assets Relief Program (TARP) money.

“What the administration needs to identify is, what do you want to do with the TARP money? Stop diverting America’s attention,” Mr. Wenhold said.

Legal analysts say the administration could have a hard time restricting the lobbying efforts of companies, even if they have received federal funds.

“The government may succeed in restricting the use of public funds to support lobbying activities but restricting the use of private funds raises First Amendment concerns,” said Kenneth A. Gross, a lobbying law specialist, citing the First Amendment right to “petition the government.”

A 1989 law restricts entities from using any money it has received from the government to lobby. Under that law, a company must use accounting methods to show it is using other money to lobby.

Jan Witold Baran, a lobbying law specialist and partner at Wiley Rein LLP, said the Treasury isn’t likely to completely cut off communication with recipients of federal funds.

“I assume the Department of Treasury will want to talk policy with the people who get their money,” he said. “I think it would be odd to give someone a lot of money and say, ‘I don’t want to talk with you.’”

The Treasury also said it intends to keep political influence out of its decisions on who gets federal assistance - similar to restrictions on tax matters - and that the Office of Financial Stability will certify that each recipient receives assistance only because it is a solid investment.

“American taxpayers deserve to know that their money is spent in the most effective way to stabilize the financial system,” Mr. Geithner said.

Lobbyists often were put on the defensive during the election campaign and in the Obama administration.

Last week, Mr. Obama signed an executive order that bars administration officials from lobbying their former colleagues during Mr. Obama’s administration and from serving in an agency if they had lobbied it in the past two years.

Also Tuesday, the Treasury announced its first batch of capital infusions for small banks since Mr. Geithner took office. The $386 million of investments were designated for “healthy” small banks in California and a dozen other states.

In contrast to similar actions by Mr. Geithner’s predecessor Henry M. Paulson Jr., the announcement came with a pledge from one bank president to use the money to increase lending. Many members of Congress complained that Mr. Paulson secured no commitments from banks to increase lending in exchange for the funds.

“With the addition of this capital, we will expand our branch network from five branches to seven or eight in the Pacific Northwest,” said Malcolm Hotchkiss, president of First ULB Corp., which received about $5 million of Treasury funds.

“We also plan to expand our lending platform with the addition of residential loan products,” he said. “Our lending goals for the 2009 business year will exceed $50 million of new loan growth.”

• Patrice Hill contributed to this report.

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