The Treasury Department announced tough new rules today designedto prevent undue influence by lobbyists on government decisionsover applications for and disbursements of funds under the TroubledAsset Relief Program.

The new rules are already applicable to American InternationalGroup, which is receiving billions in aid under several Treasuryand Federal Reserve Board programs.

A spokesman for AIG said the company has suspended “all lobbyingactivities as part of its comprehensive and ongoing review of ourbusiness practices and expenditures.”

But Scott Talbott, a senior vice president and senior lobbyistfor the Financial Services Roundtable, said he saw the new rules asa “little troubling, given the constitutionality of all the issuesinvolved.”

He said he intends to seek clarification of the new rules basedon a provision allowing industry officials to petition the TreasuryDepartment for a review of them.

Mr. Talbott also said he expects the applications of the fiveinsurers who have applied for aid under the Capital PurchaseProgram to be dealt with shortly by Treasury.

The safeguards will restrict Treasury contacts with lobbyists inconnection with applications for, or disbursements under theEmergency Economic Stabilization Act (EESA).

Its impact on the five insurance companies who have applied foraid might also include limits on executive compensation under thenew rules.

The new restrictions were announced this morning as the firstact of incoming Treasury Secretary Tim Geithner, who was confirmedby the Senate last night and immediately sworn into office by VicePresident Joe Biden, with President Barack Obama looking on.

American taxpayers deserve to know that their money is spent inthe most effective way to stabilize the financial system,” Mr.Geithner said in a statement on the agency's Web site. “Today'sactions reaffirm our commitment toward that goal,” he added.

The five insurance companies who are awaiting a Treasury nod ontheir applications for aid under the CPP program include HartfordInsurance Group, Protective Life Insurance Company, PhoenixInsurance Companies, Lincoln National and Genworth Financial.

The companies' applications to become either bank holdingcompanies or thrift holding companies and acquire ailing thrifts orbanks have been approved by federal regulators, with the exceptionof Genworth. Genworth's application to become a thrift holdingcompany is still pending.

A decision on the applications is expected by Treasury withinthe next several weeks.

A variety of proposals designed to aid troubled financialinstitutions are expected shortly from Treasury and Obamaadministration officials.

Within a week or so, Mr. Geithner and other senioradministration officials are likely to announce a mix ofinitiatives that would offer more government money to financialfirms and help these institutions deal with mounting losses fromtoxic assets, which are backed by defaulted mortgages and othertroubled loans, according to two sources in contact with Obamaofficials.

The new rules include:

o Treasury Department implementation of safeguards to preventlobbyist influence over the program, including restricting contactswith lobbyists in connection with applications for, ordisbursements of, EESA funds.

o Treasury action to ensure that political influence does notinterfere with EESA decisions, using as a model for theseprotections the limits on political influence over tax matters.

o The Office of Financial Stability (OFS) will certify toCongress that each investment decision is based only on investmentcriteria and the facts of the case.

o Only banks recommended by the primary bank regulator will beeligible for capital investments.

o OFS will publish a detailed description of the investmentreview process undertaken by the regulators and OFS.

o The Treasury Department will ensure adequate resources existto process applications as quickly as possible with priority to thedate of the application as received by OFS and will formulateprocedures to ensure integrity and regularity in the applicationprocess.