A measured and deliberate Timothy Geithner offered a glimpse of the Obama Administration's plans for tackling the financial crisis during his Jan. 21 hearing on his nomination as Treasury Secretary, even as he promised to work with Congress on shaping a massive economic stimulus bill and offered repeated apologies for failing to pay $34,000 in self-employment taxes in the past.
Geithner, the president of the New York Federal Reserve and a key player in the federal government's response so far to the financial crisis, told the Senate Finance Committee during a 3-hour session that Obama would "lay out a comprehensive plan…we hope in the next few weeks" to jump-start lending and stop a disastrous cycle of foreclosure and price declines in the housing market.A Promise of Bold Moves, Fundamental Reform
Geithner, who was introduced to the committee by former Federal Reserve Chairman Paul Volcker, promised that the Administration's response to the crisis would be bold, calling any "tentative and incrementalist" approach dangerous. "In a crisis of this magnitude, the most prudent course is the most forceful course," Geithner said. At the same time, Obama is "committed to fundamental reform" of the financial rescue initiative implemented by the Bush Administration late last year, known as the Troubled Asset Relief Program, or TARP.
But Geithner declined to give much in the way of detail. "We've seen the cost of uncertainty created by tentative signals not followed up by clear action," he said, a veiled reference to the confusion sown last fall as the Bush Treasury appeared to change course repeatedly.
There was no indication that Geithner's expected confirmation by the committee or the full Senate were harmed by his appearance. "You will be confirmed," Senator Pat Roberts (R-Kan.) told Geithner. However, Roberts said that constituents were upset at the idea that the man who would be in charge of the Internal Revenue Service had tax problems of his own. The committee could vote as early as Thursday on the nomination.Segregating Toxic Assets, Modifying Mortgages
Asked if the government was considering any of several "good bank/bad bank" proposals that would segregate some or all of the financial industry's questionable financial assets, Geithner said it was, and that it "is possible that it is something that will be part of the solution going forward." He acknowledged that such a move could be costly, but avoided addressing Senator Charles Schumer's (D-N.Y.) suggestion that the price tag could reach $3 trillion to $4 trillion.
Geithner also indicated that the Administration's proposal could include a measure put forward by Senator Dick Durbin (D-Ill.) to let bankruptcy court judges modify home mortgages. Responding to questions on the measure from Schumer, who supports it, Geithner reaffirmed Obama's campaign trail support for the concept and said it "is likely to be an important part" of the "comprehensive housing package" the Administration plans.Failure to Pay His Own Taxes
Wednesday's hearing had been postponed by a week after questions surfaced about Geithner's past tax payments. Geithner acknowledged failing to pay self-employment taxes on income earned from his time at the International Monetary Fund, despite repeated guidance from the organization about the taxes for which he was liable. In 2006, following an audit, he paid back taxes for 2003 and 2004. But he didn't pay back taxes for the two previous years until after he was nominated for the Treasury post.
Geithner said he used TurboTax software to prepare his own taxes in two of the years in question—provoking a laugh from the audience, perhaps amused that one of the most powerful men in the U.S. economy used off-the-shelf tax software—but stressed that the errors were his, not the software's.