Geithner Apologizes For Unpaid Tax

Treasury Secretary-nominee Timothy Geithner has told a Senate panel at his confirmation hearing that his failure to pay $34,000 in taxes was a careless mistake. Despite questioning from lawmakers on the issue, Geithner has wide support from both parties.

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ROBERT SIEGEL, host:

From NPR News, this is All Things Considered, I'm Robert Siegel. Timothy Geithner began his confirmation hearing this morning with an apology. President Obama's nominee for Treasury Secretary said this to the Senate Finance Committee about the tax issues that have delayed his confirmation.

(Soundbite of Senate hearing)

Mr. TIMOTHY GEITHNER (Nominee, Treasury Secretary): These were careless mistakes but they were unintentional. I want to apologize to the committee for putting you in the position of having to spend so much time on these issues when there is so much pressing business before the country.

SIEGEL: Well, if an apology right off the bat was intended to defuse the situation, as NPR's John Ydstie reports, it did not.

JOHN YDSTIE: Geithner's tax issue involved failing to pay $34,000 in taxes during the years 2001 through 2004. Until the Senate Finance Committee revealed the problem last week and his hearing was delayed, it was assumed the highly respected Geithner would be quickly confirmed. After all, the former Treasury official, who was president of the New York Federal Reserve Bank during this financial crisis, seemed uniquely qualified. But Republicans remain troubled by the tax issue today, including ranking Republican, Charles Grassley of Iowa.

(Soundbite of Senate hearing)

Mr. CHARLES GRASSLEY (Republican, Iowa): Not discussing your tax returns, Mr. Geithner, would be like sweeping them under the rug.

YDSTIE: Grassley went on to ask a series of questions about Geithner's failure to pay the full amount of Social Security tax required while he worked at the International Monetary Fund. The IMF does not withhold and pay taxes for employees, as most US companies do. It does regularly inform workers that they are responsible for paying both their portion and the employer's portion of Social Security. From the years 2001 through 2004, Geithner paid the worker's portion but not the employer's. Geithner was audited by the IRS and required to pay the shortfall for 2003 and 2004, but ultimately he told lawmakers he didn't have to pay a penalty.

(Soundbite of Senate hearing)

Mr. GEITHNER: And that just goes to the point, I think, that they felt this was a common enough problem that it wasn't unusual in my circumstance. Now, having said that, this was completely my responsibility.

YDSTIE: But, here's what's troubling Republicans. The IRS statute of limitations had run out for 2001 and 2002. So the IRS could not require Geithner to pay taxes for those years. And Geithner did not pay those taxes until the Obama transition team discovered the situation as Mr. Obama prepared to nominate him. Only then did Geithner pay it in full. Today, Arizona Republican Jon Kyl tried to get the Treasury nominee to explain why he waited.

(Soundbite of Senate hearing)

Senator JON KYL (Republican, Arizona): It's legal to rely on the statute of limitations. There's nothing wrong with relying on the statute of limitations. I think what some people find implausible is that that isn't what you're saying you did. What you're saying is that you didn't think about it until it was brought to your attention in connection with your nomination. Is that correct?

Mr. GEITHNER: I said, Senator, that I did not - looking back on it, did not think about it carefully enough, did not ask enough questions, and I regret not having done that.

YDSTIE: But Kyl continued to press Geithner, asking whether he'd thought about paying the taxes prior to being nominated. Geithner did not give him a direct yes or no answer.

(Soundbite of Senate hearing)

Mr. GEITHNER: I did what I thought was the right thing to do at that time, which is, the IRS told me what I owed...

Senator KYL: Yeah, I'm sorry to take extra time here. But, would you answer my question rather than dancing around it, please?

YDSTIE: Later, outside the hearing room, Kyl said he had hoped to vote for Geithner but was now waiting for further written responses before making up his mind. A committee vote on the nomination is scheduled for tomorrow.

Aside from his taxes, Geithner defended his role in the government's response to the financial crisis, saying the actions were necessary to avoid financial collapse. He also said within weeks, President Obama will present a detailed plan on dealing with the financial crisis to the Congress and the nation. John Ydstie, NPR News, Washington.

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Senate Seen Approving Geithner After Tax Apology

Timothy Geithner testifies Wednesday before the Senate Finance Committee on his nomination. i i

hide captionTimothy Geithner testifies Wednesday before the Senate Finance Committee on his nomination to be Treasury secretary.

Mandel Ngan/AFP/Getty Images
Timothy Geithner testifies Wednesday before the Senate Finance Committee on his nomination.

Timothy Geithner testifies Wednesday before the Senate Finance Committee on his nomination to be Treasury secretary.

Mandel Ngan/AFP/Getty Images

It's Your Recession.

We're just blogging it . . .

The Senate Finance Committee is expected to approve Timothy Geithner to be Treasury secretary after he apologized to the panel Wednesday for failing to pay tens of thousands of dollars in taxes. Geithner is considered crucial to the new Obama administration in dealing with the global financial crisis and tight credit conditions that have choked the economy.

Despite sometimes intense interrogation from senators of both parties, Geithner is expected to win the committee's backing when it meets Thursday and be confirmed by the full Senate next week.

Geithner said his mistakes were careless and avoidable but "completely unintentional." He apologized to the committee and said, "I should have been more careful."

Geithner told the panel that the new administration must address a "catastrophic loss of trust and confidence in the global financial crisis" and get credit flowing again.

He acknowledged growing unhappiness in Congress and among taxpayers over how the $700 billion financial bailout money has been spent thus far by the outgoing Bush administration.

Geithner said that Obama and he believe the bailout program needs serious reform. "Our test is to act with the strength, speed and care necessary to get our economy back on track," he said.

The nominee, currently president of the New York Federal Reserve Bank, also addressed recent controversy over his failure to pay taxes over several years.

Geithner's confirmation came into doubt after the disclosure last week that he did not pay tens of thousands of dollars in taxes for Social Security and Medicare while he was employed by the International Monetary Fund. In addition, he employed a housekeeper who lacked proper documents for the last three months of her employment.

In different economic times, Geithner's confirmation might have been derailed by the news that he only recently paid more than $48,000 in delinquent taxes and interest for his earnings while working at the IMF.

Geithner paid some of the taxes in 2006 after an IRS audit discovered the discrepancy for the years 2003 and 2004.

The Senate Finance Committee hearing on Geithner's nomination scheduled for last week was postponed until Wednesday after some senators demanded more time to consider the controversy.

But with the economy so fragile, and with Geithner's strong qualifications and domestic and international profile, most senators chose to address his tax issues delicately.

Charles Grassley (R-IA) dug deepest into the tax lapse and asked Geithner which software he used to prepare his taxes during the years in question. After saying the mistakes were his and not the software's, Geithner told the committee he used TurboTax.

As Treasury secretary, Geithner would be tasked with overseeing a mammoth rescue of the nation's economy.

In the past year, the Fed lent out more than $1 trillion in its efforts to stabilize the financial and credit markets. The Obama administration is finalizing its plans for the second part of the $700 billion Troubled Assets Relief Program.

In recent days, President Obama's top economic advisers have made a concerted push to convince congressional leaders and the public that Obama will manage the TARP program in a different way than the Bush administration.

Former President Bush committed most of the initial $350 billion of the TARP to capital injections at financial institutions but required little oversight in their use of the funds.

The Obama administration has said it will focus more on helping consumers, local governments and businesses than on helping banks.

Geithner took pains not to put a price tag on the administration's efforts to further stabilize the markets but said "we want to work with members of Congress in a bipartisan way to address these serious issues."

Geithner, 47, rose from a low-level job in the 1980s to Treasury undersecretary for international affairs under President Clinton. He later was a director of the IMF before becoming president of the New York Fed in late 2003.

In the Fed position, he played a significant role in recent efforts to calm roiled financial markets and is believed to have been a central player in the Bush administration's rescue and sale of Bear Stearns and the bailout of insurance giant American International Group Inc.

Several key committee members voiced strong support for Geithner, saying that Obama needs his full economic team in place as quickly as possible.

"You will be confirmed," Sen. Pat Roberts (R-KS) told Geithner. But Roberts said his phones were "ringing off the hook" from people in Kansas complaining about the prospects of having a Treasury secretary who was careless in tending to his own tax liabilities.

There were several tense exchanges. Sen. Jim Bunning (R-KY) delivered some of the strongest criticism of the day, saying Geithner was "involved in just about every flawed bailout" implemented by the Bush administration. Bunning said the tax mistakes were his biggest worry, saying his research showed the IMF makes such tax payment requirements clear to all employees.

In a later exchange with Sen. Ron Wyden (D-OR), Geithner made a minor mea culpa, saying the New York Fed should have watched financial institutions more closely in recent years.

"Should your supervision have been more effective?" Wyden asked.

"Absolutely," Geithner replied.

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