Last month, the Treasury Department announced new rules restricting contacts made by lobbyists working for firms receiving bailout funds. Those rules, however, appear to have one easy loophole, lobby Congress to lobby for you. According to Treasury Department officials, the distribution of bailout funds is determined by whom regulators – Office of Thrift Supervision, Federal Deposit Insurance Company – suggest to the Department. Lawmakers can easily lobby the regulators to make suggestions to Treasury. And of course, lobbyists can easily lobby Congress to lobby the regulators. Last week, the Washington Post exposed this practice:

The efforts of lawmakers to secure funding for financial firms are not illegal. But the bailout program has become a sensitive subject in Washington and across the country. The Treasury Department has vowed strict new rules against lobbying its officials for TARP funds. And an angry public has displayed little sympathy for banks that have turned to the government for rescue after contributing to the financial crisis.

“The whole TARP issue is politically charged,” said Ray Gustini, a partner at Nixon Peabody, a firm with more than a dozen clients seeking bailout funds. “It’s become a touchy subject. People are reevaluating the pitches they are making.”

But the pitches are still coming.

Companies seeking bailout money have hired lobbyists and enlisted the help of trade associations. They have lobbied friends inside the government to help their cause. They have increasingly leaned on lawmakers to go to bat for them.

The article goes on to show a number of examples of this occurring with banks contacting and receiving help from a number of senators and congressmen. There is certainly nothing wrong with this, as it falls under their duty serve their constituency. The article shows that many of these banks needed the bailout funds but were unable to get a reception from Treasury and needed a helping hand from a connected individual like a lawmaker.

What is worrying is that these smaller, local banks are now hiring lobbyists and agents in Washington to help them navigate the new system of federal involvement in the banking system. This begins to create a possibility of some of these local banks to play the same games that some local companies play to gain earmarks. Perhaps, they will seek out favors and money that they do not really need, but a lobbyist and a lawmaker can help get them. How will we know when a firm receives federal money because it really needed it or if it was aided by connections and powerful lobbyists?

This is yet another example of why we need tougher lobbyist disclosure rules for contacts with all federal officials, including lawmakers and their staff.