Posted on Thu, Jan. 22, 2009
last updated: January 22, 2009 05:36:53 PM
WASHINGTON — The Senate Finance Committee on Thursday approved the nomination of Timothy Geithner to be Treasury secretary, but his final confirmation could be delayed until next week as Republicans seek to delve deeper into his personal finances.
Geithner, the head of the Federal Reserve Bank of New York since November 2004, appeared to be a slam-dunk when he was nominated late last year. The recent revelation of numerous tax errors, including failure to pay self-employment taxes over a four-year period, however, created unexpected hurdles. Geithner belatedly paid all his taxes, plus interest.
Despite the concerns over those errors, the panel voted 18-5 to send Geithner's nomination to the full Senate for consideration. All five "no" votes came from Republicans.
Iowa Sen. Charles Grassley, the senior Republican on the committee, voted against Geithner.
"The nominee's answers to the committee and during the vetting process give me pause. The explanations for irregularities have ranged from statements that he should have known, to proclamations that if only his accountants had warned him," Grassley said in an opening statement. "I received a message yesterday from a constituent in Dubuque expressing concern about this nomination. The constituent wrote, 'If the man cannot handle his own finances, how is he going to handle the country's?'"
Thursday's vote followed a four-hour hearing on Wednesday, where Geithner was grilled over both his tax problems and decisions he made as part of government-wide efforts to bail out financial institutions. His response to the committee's written questions was released Thursday and shed some light on President Barack Obama's economic plans.
In an answer sure to rile Wall Street, Geithner supported the regulation of hedge funds, the lightly regulated private pools of capital that invest on behalf of the ultra wealthy and endowment funds of universities.
"With an objective of bringing greater transparency and oversight, I believe that we should consider requiring registration of hedge funds," he wrote.
Geithner was vague about stimulus efforts, but he answered more freely about how the new administration will use the balance of October's $700 billion Wall Street rescue fund.
For starters, he wrote, healthy banks that aren't short of capital but seek federal bailout money will have to boost their lending to consumers and businesses above a pre-determined baseline level.
"Banks receiving government capital will be required to provide detailed and timely information on their lending patterns broken down by category," Geithner said, adding that companies will report this information quarterly and describe factors "that influenced their decisions."
The Obama administration had hoped for Geithner's quick confirmation to move forward on its economic recovery efforts, but some Republicans were using procedural rules to try to delay Geithner's confirmation vote in the full Senate until next week.
Some Democrats acknowledged that in normal times, Geithner, 47, wouldn't have been confirmed. His deep involvement in Wall Street rescue efforts, however, offers the nation both experience and continuity, and for many Democrats that trumps concerns about his tax stumbles.
Before Thursday's vote, the Treasury nominee provided a detailed, 102-page response to questions from the Senate Finance Committee.
Geithner was blunt at times.
"President Obama — backed by the conclusions of a broad range of economists — believes that China is manipulating its currency," wrote Geithner, expressing a view that the previous Treasury secretary, Henry Paulson, was unwilling to voice.
Geithner sounded more like Paulson, however, when he warned that developing the proper response to the currency manipulation is no easy task.
"The question is how and when to broach the subject in order to do more good than harm," he wrote, suggesting that entering a trade spat with China amid a global economic crisis would be inappropriate.
Now is the time to engage China, he suggested.
"The latest figures show that China's growth in 2008 was 9 percent, a full 4 percentage points lower than in the previous year. Because China accounts for such a large fraction of the world economy, a further slowdown in China would lead to a substantial fall in world growth (and demand for U.S. exports) and delay recovery from the crisis," he wrote. "Therefore the immediate goal should be for us to convince China to adopt a more aggressive stimulus package as we do our part to try to pass a stimulus package here at home."
Several of the questions accused Geithner of complicity in today's global financial crisis for failing to properly regulate Citigroup, whose former senior adviser Robert Rubin, a Clinton Treasury secretary, was Geithner's mentor in the 1990s.
"Citigroup's supervisors, including the Federal Reserve, failed to identify a number of their risk management shortcomings and to induce appropriate changes in behavior," Geithner answered, in a mea culpa of sorts. "The Fed and other regulators are in the process of carefully evaluating the sources of the current problems and the changes that need to be made to prevent this situation in the future."
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