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K Street Weighs Ramifications of Ban on Former Frank Aide

Watchdog groups are seizing on the recent edict by House Financial Services Chairman Barney Frank (D-Mass.) to extend the one-year lobbying ban for a former top staffer as a way to push Congress to revise lobbying rules to expand the cooling-off period for Members of Congress and senior staffers headed to K Street.

“Clearly what’s going on here is Barney Frank understands he’s dealing with an extremely sweeping and controversial issue,— Public Citizen’s Craig Holman said. “He’s trying to avoid having it tainted by the revolving door.—

Holman said he would like Congress to expand the lobbying ban for lawmakers and senior staff in the House to two years.

Democracy 21’s Fred Wertheimer also supports increasing the lobbying ban.

“Revolving-door problems are real and cause public credibility problems about the way government decisions are made, and there continues to be a need to strengthen the revolving provisions in the House,— Wertheimer said.

Lawmakers considered broadening the lobbying ban for House Members to two years, but the provision was ultimately dropped from the final version of the Honest Leadership and Open Government Act that passed in 2007. The bill did increase the cooling-off period for Senators to two years.

Frank issued a memo last week stating that Michael Paese, a former top staffer on the committee, will be barred from communicating with the Democratic Members of the Financial Services panel until the end of the Congressional term next year.

Paese heads Goldman Sachs’ Washington, D.C., lobbying office. His statutory lobbying ban expired on Sept. 11.

Paese did not return calls Friday, but a Goldman Sachs spokesman said,“We clearly respect Chairman Frank’s desire that he be recused for longer.—

Frank’s decision comes as Congress is about to embark on legislation that is expected to bring the most sweeping regulatory changes Wall Street has seen in decades.

Frank spokesman Steven Adamske said that extending the lobbying ban to Paese is an isolated action and not part of a broader effort on lobbying reform.

“We’re in a period of updating the regulations and doing a whole regulatory reform and wanted to act out of an abundance of caution so that nobody has any undue influence,— Adamske said.

Still, the measure is unusual.

While lobbyists who are married to staffers often recuse themselves from lobbying their spouse and the office they work in, ethics lawyers said they had never seen a Member of Congress officially extend the lobbying moratorium.

The move isn’t one that K Street is excited about. Lobbyists say they are worried that other Members of Congress may decide to take similar action on an ad hoc basis.

“It’s one more hurdle that lobbyists are having to deal with, and it may open the door to additional restrictions to Capitol Hill,— said Ken Gross, an ethics lawyer at Skadden, Arps, Slate, Meagher & Flom.

Still, Gross said he doubted it would lead Congress to overhaul the lobbying laws to include a longer cooling-off period.

“It was definitely looked at, thought about, negotiated, and it came out to one year,— he said.

Frank’s decision to bar Paese from lobbying Democratic Members of the Financial Services panel was done in consultation with Paese, according to a lobbyist familiar with the situation.

Paese, who served most recently as deputy staff director to Frank, is a close confidant of the Massachusetts Democrat. He joined Goldman Sachs in April after a short stint as the chief lobbyist for the Securities Industry and Financial Markets Association.

While Goldman Sachs has a lower profile inside the Beltway compared to many of its counterparts, the bank has beefed up its Washington government affairs operation in recent years.

Goldman Sachs spent more than $5 million in federal lobbying in 2008. The bank spent $1.3 million during the first half of 2009.

Still, the bank has remained short-handed in its in-house capabilities on the House side since Marti Thomas, then-Goldman Sachs’ most senior Democratic lobbyist, left for the Duberstein Group in April. Thomas remains as an outside consultant to the bank.

Thomas’ departure followed that of Jud Sommer, Goldman’s longtime head of the Washington office, and Mark Patterson, its co-head of U.S. government relations, leaving in 2008. Sommer went to UnitedHealth Group as its top lobbyist, while Patterson was tapped to serve as chief of staff to Treasury Secretary Timothy Geithner. Ann Costello, former head of its U.S. government relations, also left this spring for Bank of New York Mellon Corp.

Earlier this year, the firm picked up Republican Todd Malan, who was president of a trade association representing foreign companies’ U.S. subsidiaries, and Democrat Ken Connolly, who was at Mintz Levin.

Goldman Sachs also beefed up its Democratic House ties this spring, hiring Steve Elmendorf, a former senior adviser to then-House Democratic Leader Richard Gephardt (Mo.), of Elmendorf Strategies.

Banking lobbyists downplayed the significance of extending the lobbying ban, saying that Paese was hired for strategy and substance.

“They have plenty of resources to carry their message,— said one Democratic lobbyist, noting that Goldman Sachs and its other in-house lobbyists and contract consultants can continue to push the bank’s position before Congress.

“I don’t see it handicapping them at all,— said a financial services lobbyist familiar with Goldman Sachs. “Michael is running the office. While he’s close to Barney, he’s got a very solid staff underneath him.—