President Obama's nominee to be U.S. Treasury Secretary headed towards Senate confirmation as the finance committee turned aside concerns about the nominee's failure to pay federal taxes when he was living overseas.
Timothy Geithner apologized for being careless in making unintentional errors when he failed to pay $34,000 in taxes earlier this decade. The 47-year-old president of the New York Federal Reserve Bank neglected to pay certain U.S. income taxes when he was employed by the International Monetary Fund. He has since paid the taxes.
The committee's majority Democrats accepted Geithner's explanation, but conservative Republican Jim Bunning did not, and he also zeroed in the nominee's support for the Bush administration's bailout of failing U.S. banks.
"Even before the disclosure of the nominee's tax problems, I had serious reservations about this nomination," he said. "Mr. Geithner has been involved in just about every flawed bailout action of the previous administration."
Indeed, Geithner defended the actions that have provided hundreds of billions of dollars to banks that incurred huge loses in the economic crisis that began in August 2007. He said banks would be much weaker and unable to lend money without the massive assistance provided by Congress late last year.
"It is a very delicate, complicated balance," said Geithner. "But we have to make sure that as we stabilize the banks, make sure they are strong enough to lend, that we are doing things that are going to be effective in getting risk premiums down [the cost of borrowing], interest rates down, and credit flowing again."
Geithner acknowledged that the $700 billion bank bailout is unpopular and in need of serious reform. About one half of the money has already been disbursed, and before he left office President Bush asked Congress to release the second half of the money so the Obama administration would have access to it right away.
Geithner said in the next few weeks the new administration will submit to Congress a comprehensive plan for responding to the housing and financial crisis. He also urged approval of a separate economic recovery plan aimed at stimulating the economy, which is mired in its worst recession in more than 25 years.
Prior to becoming head of the New York Fed, Geithner served in a variety of positions at the Treasury Department and has been deeply involved in its international financial operations.