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After Taxing Hearing, Panel Likely To OK Geithner

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After Taxing Hearing, Panel Likely To OK Geithner

After Taxing Hearing, Panel Likely To OK Geithner

After Taxing Hearing, Panel Likely To OK Geithner

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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President Obama's pick for Treasury secretary, Timothy Geithner, began his confirmation hearing with an apology Wednesday. He told members of the Senate Finance Committee the tax questions that delayed his confirmation were the result of his own careless mistakes. But he added the mistakes were unintentional. The panel is expected to vote Thursday on his nomination.


This is Morning Edition from NPR News. I'm Renee Montagne. And with the country in a recession, it's pretty clear that President Obama's top priority will be the economy, and to deal with the troubled economy, he'll need the help of a Treasury secretary. The Senate Finance Committee is scheduled to vote today on Timothy Geithner, Mr. Obama's nominee for that post. Geithner's failure to pay $34,000 in taxes earlier this decade clouded his nomination and delayed the process, but the committee is expected to recommend that the full Senate confirm Geithner. NPR's John Ydstie reports.

JOHN YDSTIE: Geithner has now paid all the past tax obligations in full. But during his confirmation hearing, Republicans continued to explore questions about whether Geithner had intentionally avoided the taxes or whether his payment of some of them just before his nomination was opportunistic. The concerns led the Finance Committee's ranking Republican, Charles Grassley of Iowa, to ask the Treasury nominee a series of questions during the hearing, including this one.

(Soundbite of congressional hearing, January 21, 2009)

Senator CHARLES GRASSLEY (Republican, Iowa; Ranking Republican, Senate Committee on Finance): Were you liable for self-employment taxes on your IMF income from 2001 through 2004?

Mr. TIMOTHY GEITHNER (Nominee, Secretary, U.S. Department of the Treasury, Barack Obama Administration): Yes.

YDSTIE: But Geithner only paid half the tax, which includes Social Security and Medicare taxes. Essentially, Geithner said, he was confused about his obligations. Actually, there's often confusion among IMF employees on this issue because the International Monetary Fund, unlike most U.S. employers, doesn't withhold taxes for its workers and forward them to the government. Geithner said yesterday he mistakenly thought the IMF was forwarding the employer's portion of the tax to the IRS, so he just forwarded the worker's portion. That meant he was paying only half the tax required; this, despite the fact that the IMF regularly informs its workers of their obligation. In the end, Geithner said he was at fault.

Mr. GEITHNER: These were careless mistakes, they were avoidable mistakes, but they were completely unintentional, and I take full responsibility for them. And again, I apologize for putting you in the position where you had to spend so much time looking through these questions, particularly now.

YDSTIE: But Republicans weren't willing to let Geithner off the hook. Their concern centered around the fact that after an IRS audit in 2006, Geithner paid the back taxes for 2003 and '04, but the statute of limitations prevented the IRS from collecting the taxes for 2001 and '02. And Geithner didn't pay those taxes until the Obama transition team brought the issue to his attention just before he was nominated. That troubled Republican John Kyl of Arizona.

Senator JOHN 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: In the end, Kyl said, that though he initially had hoped to vote for Geithner, the responses troubled him enough that he was reconsidering. Still, there appears to be enough support to move Geithner's nomination forward. The Treasury nominee responded to other concerns, too. He defended the decisions he'd participated in during the financial crisis as president of the New York Federal Reserve. Those decisions committed hundreds of billions of dollars to rescue companies like AIG and Bear Stearns. Geithner said the threat of financial collapse required the bold action, despite the risk for taxpayers. And he suggested Congress and the Obama administration should not shrink from taking bold action to fix the economy now.

Mr. GEITHNER: The ultimate costs of this crisis will be greater if we do not act with sufficient strength now. In a crisis of this magnitude, the most prudent course is the most forceful course.

YDSTIE: Geithner said President Obama would present a detailed plan to address the financial crisis to the Congress and the nation in a few weeks. John Ydstie, NPR News, Washington.

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Senate Seen Approving Geithner After Tax Apology

NPR's John Ydstie Talks About Geithner's Apology On 'All Things Considered'

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NPR's Confirmation Hearing Wrap-Up Special

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Timothy Geithner testifies Wednesday before the Senate Finance Committee on his nomination to be Treasury secretary. Mandel Ngan/AFP/Getty Images hide caption

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Mandel Ngan/AFP/Getty Images

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.