UPDATE 1-US Treasury to restrict lobbying on bailout funds

(Adds details on Geithner and New York Fed, paragraphs 4-8)

By David Lawder

WASHINGTON, Jan 27 (Reuters) - U.S. Treasury Secretary Timothy Geithner announced new rules on Tuesday to limit lobbying by companies that receive government financial assistance in one of his first moves after being sworn into office.

The rules restrict lobbyist contacts in connection with applications for or disbursement of the Treasury's $700 billion bailout program, the Treasury said in a statement.

"These new rules go beyond the approach taken under the Emergency Economic Stabilization Act to date and will help ensure a new level of openness and accountability going forward," the Treasury said.

Geithner, who stepped down as head of the New York Federal Reserve Bank, won U.S. Senate confirmation in a 60-34 vote on Monday evening as his experience in battling the financial crisis trumped concerns about his past underpayment of $34,000 in self-employment taxes.

He was quickly sworn in with President Barack Obama at his side and will participate in a meeting of Obama's economic team on Tuesday.

Geithner also will make phone calls to foreign finance ministers on Tuesday, meet with Treasury staff on financial stability and regulatory reform plans and attend a Federal Reserve dinner in his honor, a Treasury spokeswoman said.

The New York Fed on Tuesday was expected to name William Dudley, chief of the bank's influential markets group, as its new president, according to a source familiar with the decision.

A former Goldman Sachs chief economist, Dudley will become a permanent member of the Fed's rate-setting Federal Open Market Committee, which begins a two-day meeting on Tuesday.

EASING CONGRESSIONAL CONCERNS

The new lobbying rules for the bailout program will use as a model the protections that limit political influence on tax matters, the Treasury said. They will requires the Treasury to certify to Congress that "each investment decision is based only on investment criteria and facts of the case."

The rules are being unveiled as Congress is releasing the second $350 billion of the Troubled Asset Relief Program after widespread disappointment with the handling of the first half by former Treasury Secretary Henry Paulson.

Obama administration officials also have signaled that they may seek additional funds to shore up the financial system as they prepare a comprehensive stabilization plan due by the end of next week.

Many lawmakers feel that there were too few controls on companies receiving the first half of the TARP money, no clear way to track whether banks used the funds to boost lending and too little oversight for the program.

The new rules also aim for transparency by using objective criteria, including providing capital investments only to those banks recommended by their primary regulator.

The Treasury said it will publish a detailed description of the investment review process and ensure adequate resources are available to handle applications as quickly as possible. (Reporting by David Lawder)