Bravo, Geithner for Crackdown on Bailout Lobbying

Timothy Geithner’s first act as Treasury Secretary has been to issue new rules limiting lobbying for access to the $700 billion federal bailout program. It’s about time.

Specifically, Geithner is ordering Treasury to combat lobbying influence over the Emergency Economic Stabilization Act (EESA) which handles the $700 billion Troubled Asset Relief Program (TARP). So far, funds have been used for a plethora of purposes including buying stock in banks, bailing out automakers and making loans to capitalize lending.

Geithner says that Treasury will not let political influence affect EESA decision making. Only banks recommended by the primary bank regulator will be eligible for capital investments. The Office of Financial Stability within Treasury will publish detailed reviews of investment reviews. Applications will be processed as quickly as possible.

Naturally, with a nest egg as big as $700 billion, TARP has had politicians and corporate executives licking their chops. Dozens of banks have raced and have exhausted the first $350 billion tranche, some of them multiple times.

And, some unusual characters have been involved in pressing favored banks’ cases for bailout bucks.

No less a player than Democrat Barney Frank, head of the House Financial Services Committee and a leading proponent for tougher financial regulation, has admitted that he lobbied the Treasury Department to get OneUnited Bank of Boston federal bailout money. Frank insists it was a legitimate attempt to help the minority-owned bank, according to the Boston Globe.

 Virginia Congressman Eric Cantor, who serves as the influential House Republican Whip, is faced with a controversy over his wife’s bank getting bailout money. Diane Cantor runs the Virginia branch of Emigrant Bank’s wealth-management division, Virginia Private Bank & Trust, which targets wealthy clients. Its associate bank, New York Private Bank and Trust, was the beneficiary of a Treasury Department purchase of $267 million work of the bank’s preferred stock to shore it up.

Cantor has played a key role in marshaling Republican support for the bailout program. His office says that Cantor played no role in lobbying for the bailout and that his wife didn’t know about it.

Now that Geithner is crackling down on lobbying maybe he’ll also address the other crucial problem facing TARP: it’s lack of focus.