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WASHINGTON: When the U.S. government said it would spend $700 billion to rescue the financial industry, it seemed to be an ocean of money. But after one of the biggest lobbying free-for-alls in memory, it suddenly looks like a dwindling pool.
Many new supplicants are lining up for infusions of capital as sums of billions of dollars are channeled to other beneficiaries like the insurer American International Group and possibly soon to the credit card company American Express.
Of the initial $350 billion that Congress freed up, out of the $700 billion in bailout money contained in the law that passed in October, the Treasury Department has committed all but $60 billion. The shrinking pie - and the growing uncertainty over who qualifies - has thrown the legal and lobbying establishment in Washington into a mad scramble.
The Treasury is under siege by an army of hired guns for banks, savings and loan associations and insurers - as well as for improbable candidates like a Hispanic business group representing plumbing and home-heating specialists. That last group wants the Treasury to hire its members as contractors to take care of houses that the government may end up owning after buying distressed mortgages.
The lobbying frenzy worries many traditional bankers - the original targets of the rescue program - who fear that it could blur, or even undermine, the government's effort to stabilize the financial system after its worst crisis since the 1930s.
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Among the most rattled are community bankers.
“By the time they get to the community banks, there may not be enough money left,” said Edward Yingling, president of the American Bankers Association. “The marketplace is looking at this so rapidly that those who have the money first may have some advantage.”
Adding to the frenzy is the possibility that the next Congress and White House could change the rules again. The president-elect, Barack Obama, has added his voice by proposing that the struggling automakers get U.S. government aid, which could mean giving them access to the fund - something that Treasury Secretary Henry Paulson Jr. has resisted.
Despite the line outside its door, the Treasury is not worried about running out of money, according to a senior official. It has no plans to ask lawmakers to free the second $350 billion of the rescue package during a special session of Congress, which could begin next week.
That will limit the pot of money available, at least until the new Congress is seated in January. Meanwhile, the list of candidates for a piece of the bailout keeps growing.
On Monday, the Treasury announced that it would inject an additional $40 billion into AIG, amid signs that the government's original bailout plan was putting too much strain on the company. American Express won approval Tuesday to transform itself into a bank holding company, making it eligible for an infusion.
Then there is the National Marine Manufacturers Association, which is asking whether boat finance companies might be eligible for aid to ensure that dealers have access to credit to stock their showrooms with boats - costs that have gone up as the credit markets have calcified. Using much the same rationale, the National Automobile Dealers Association is pleading that car dealers get consideration, too.
“Unfortunately, I don't have a lot of good news for them individually,” said Jeb Mason, who, as the Treasury's liaison to the business community, is the first port of call for lobbyists. “The government shouldn't be in the business of picking winners and losers among industries.”
Mason, 32, a lanky Texan in black cowboy boots who once worked in the White House for Karl Rove, shook his head over the dozens of phone calls and e-mail messages he gets every week. “I was telling a friend, 'This must have been how the Politburo felt,”' he said.
The congressional bailout law gave the Treasury broad authority to decide how to spend the $700 billion. Under the terms of the $250 billion capital purchase program announced in October, cash infusions are available to “qualifying U.S. banks, savings associations, and certain bank and savings and loan holding companies, engaged only in financial activities.”
That definition has grown to include private banks and insurers like Allstate and MetLife, which own savings and loans. It may also encompass industrial lenders like GE Capital and GMAC, the financing arm of General Motors, provided they win approval to reclassify themselves as banks or savings and loan holding companies.
The Treasury set a deadline of this Friday for institutions to apply for capital investments, which has meant a grueling few weeks for already overworked officials like Mason.