Tax lapse likely won’t stand in way of Geithner approval

Timothy Geithner, President Obama’s nominee for Treasury secretary, told senators that the president will present a new plan to lawmakers within weeks to stem the financial crisis.

The “comprehensive plan” will focus on the credit crunch, the deteriorating housing sector and student and consumer loan markets, Geithner said on Wednesday at his confirmation hearing before the Senate Finance Committee.

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Geithner, who has been at the center of economic policymaking throughout the financial crisis from his perch as head of the Federal Reserve Bank of New York, appears headed to confirmation, despite continuing questions about his failures to pay taxes appropriately. The Senate panel has scheduled a vote on Geithner’s confirmation on Thursday.

“I’m going to try to get him confirmed this week … I think everyone in the committee knows he will be confirmed,” said Senate Finance Committee Chairman Max Baucus (D-Mont.). “It’s just a question of timing.”

But Republican senators grilled Geithner during the four-hour hearing, in particular for failing to pay $34,000 in Social Security and Medicare taxes.

Sen. Chuck Grassley (R-Iowa) called the tax issue “troubling” and said Geithner’s explanations for the tax flub were marked by “many excuses.” Sen. Jim Bunning (R-Ky.), a fervent opponent of the federal bailouts and ardent critic of the Federal Reserve for many years, said he had “serious reservations” about the nomination. Sen. Jon Kyl (R-Ariz.) also repeatedly questioned Geithner on the tax issue, and has not said whether he will support Geithner’s confirmation. Kyl and Bunning had blocked the committee from holding the confirmation hearing before Obama was sworn into office.

After the hearing, Kyl continued to express his reservations about Geithner, which were based in part on the nominee’s defense of the stimulus package pushed by Democrats. Kyl stopped short of saying, however, that he would try to block the nomination.

“I very much wanted to support his nomination for a variety of reasons, but I must tell you that I was troubled by his testimony today. He’s going to be providing some more written material to the committee, and it will be important to review that before I make up my mind.”

Other Republicans, however, were more willing to let the nomination go through, with Sen. Pat Roberts (R-Kan.) telling Geithner: “You’re going to be confirmed.”

Geithner apologized to the senators and said the lapses were “careless” and “unintentional.”

“I should have been more careful,” he said, adding that he had filed his tax returns by using TurboTax computer software and with help from an accountant.

{mospagebreak}Geithner urged lawmakers to quickly pass a fiscal stimulus package that House Democrats unveiled last week that would cost $825 billion. He said the stimulus package included hundreds of billions of dollars in tax benefits to speed up the impact the measure would have on the economy. The Congressional Budget Office last week expressed skepticism about the ability of infrastructure spending to quickly bolster the economy.

But Geithner also stressed that further action is necessary to shore up the financial sector specifically, which is showing fresh signs of deterioration. Congress moved to allow Obama to access the rest of the $700 billion financial rescue package that lawmakers passed in October but that has been heavily criticized ever since.

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Several of the nation’s biggest banks have required repeated bailouts from the federal government since the fall, and federal regulators have floated the possibility of setting up a federally run bank that clears out the bad assets on balance sheets.

Paul Volcker, who appeared before the committee to introduce Geithner, said the current crisis is “the mother of all financial crises,” adding that it would require “several trillion dollars” overall to resolve. Volcker, the former Federal Reserve chairman, is Obama’s pick to lead the Economic Recovery Advisory Board.

In a sign of the new financial troubles, the stock price for many major banks plunged on Tuesday and the Dow Jones Industrial Average fell 332 points. It was the worst Inauguration Day decline in history, but the market showed some signs of recovery on Wednesday.

Geithner called for quick interventions and “aggressive action” to prevent the crisis from wreaking even worse havoc.

“In a crisis of this magnitude, the most prudent course is the most forceful course,” Geithner said. He moved to defend the federal government’s actions thus far, saying that the economy would be in worse turmoil had the Treasury and Federal Reserve not taken the steps they did.

Geithner did not lay out specifics about how the rest of the Troubled Asset Relief Program (TARP), the formal name of the $700 billion package, would be used, but pledged greater emphasis on accountability and oversight.

“We have to reshape and redesign this program,” he said.

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