The Treasury Department announced tough new rules today designed to prevent undue influence by lobbyists on government decisions over applications for and disbursements of funds under the Troubled Asset Relief Program.
The new rules are already applicable to American International Group, which is receiving billions in aid under several Treasury and Federal Reserve Board programs.
A spokesman for AIG said the company has suspended “all lobbying activities as part of its comprehensive and ongoing review of our business practices and expenditures.”
But Scott Talbott, a senior vice president and senior lobbyist for the Financial Services Roundtable, said he saw the new rules as a “little troubling, given the constitutionality of all the issues involved.”
He said he intends to seek clarification of the new rules based on a provision allowing industry officials to petition the Treasury Department for a review of them.
Mr. Talbott also said he expects the applications of the five insurers who have applied for aid under the Capital Purchase Program to be dealt with shortly by Treasury.
The safeguards will restrict Treasury contacts with lobbyists in connection with applications for, or disbursements under the Emergency Economic Stabilization Act (EESA).
Its impact on the five insurance companies who have applied for aid might also include limits on executive compensation under the new rules.
The new restrictions were announced this morning as the first act of incoming Treasury Secretary Tim Geithner, who was confirmed by the Senate last night and immediately sworn into office by Vice President Joe Biden, with President Barack Obama looking on.
American taxpayers deserve to know that their money is spent in the most effective way to stabilize the financial system,” Mr. Geithner said in a statement on the agency's Web site. “Today's actions reaffirm our commitment toward that goal,” he added.
The five insurance companies who are awaiting a Treasury nod on their applications for aid under the CPP program include Hartford Insurance Group, Protective Life Insurance Company, Phoenix Insurance Companies, Lincoln National and Genworth Financial.
The companies' applications to become either bank holding companies or thrift holding companies and acquire ailing thrifts or banks have been approved by federal regulators, with the exception of Genworth. Genworth's application to become a thrift holding company is still pending.
A decision on the applications is expected by Treasury within the next several weeks.
A variety of proposals designed to aid troubled financial institutions are expected shortly from Treasury and Obama administration officials.
Within a week or so, Mr. Geithner and other senior administration officials are likely to announce a mix of initiatives that would offer more government money to financial firms and help these institutions deal with mounting losses from toxic assets, which are backed by defaulted mortgages and other troubled loans, according to two sources in contact with Obama officials.
The new rules include:
o Treasury Department implementation of safeguards to prevent lobbyist influence over the program, including restricting contacts with lobbyists in connection with applications for, or disbursements of, EESA funds.
o Treasury action to ensure that political influence does not interfere with EESA decisions, using as a model for these protections the limits on political influence over tax matters.
o The Office of Financial Stability (OFS) will certify to Congress that each investment decision is based only on investment criteria and the facts of the case.
o Only banks recommended by the primary bank regulator will be eligible for capital investments.
o OFS will publish a detailed description of the investment review process undertaken by the regulators and OFS.
o The Treasury Department will ensure adequate resources exist to process applications as quickly as possible with priority to the date of the application as received by OFS and will formulate procedures to ensure integrity and regularity in the application process.
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