January 21, 2009 6:58 pm

Geithner tax affairs under spotlight

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Not many nominees for Treasury secretary have been asked to specify exactly which software programme they used to file their taxes. (Answer: the widely used TurboTax application.) But for Republicans on the Senate finance committee, the $34,000-plus (€26,000, £25,000) in personal taxes that Tim Geithner failed to pay on time appeared almost as important as the $800bn-plus in new tax cuts and spending that the administration of Barack Obama is likely to unleash on the US economy.

Mr Geithner’s appearance in front of the committee on Wednesday was the kind of self-abasing mixture of conciliation and contrition that generally goes down well in the Senate. Preceded by Paul Volcker, the former Federal Reserve chairman who was brought on as a heavyweight character witness for Mr Geithner’s nomination, Mr Geithner said: “These were careless mistakes. They were avoidable mistakes. But they were unintentional.”

This was insufficient to placate some members of the committee. Jim Bunning, a conservative Republican from Kentucky, said that Mr Geithner had not provided a proper explanation for why he had failed to pay.

But with the Democrats backing Mr Geithner, what seemed to be emerging was that only senators with sufficient ideological reasons to reject the nominee for other reasons would seize on the personal tax issue to oppose his nomination. Mr Bunning is a strong critic of what he deems the “flawed” monetary policy of the Federal Reserve, and cited both this and Mr Geithner’s apparent reluctance to get tough on Chinese currency manipulation as reason enough to doubt his nomination even without the tax issue.

Charles Grassley, the senior Republican on the committee, is closer to his party’s centre of gravity in the Senate. And while it was he who subjected Mr Geithner to the detailed questioning on exactly what prompts his tax software had asked him to complete, his critiques of Mr Geithner’s record were more nuanced than Mr Bunning’s objections. “I can expand on what’s going to play a factor” in Mr Geithner’s nomination, Mr Grassley told reporters. “It isn’t just taxes, which is probably what’s on your mind.”

Indeed, Mr Grassley said one of the reasons that he wanted a clearer view on policy from Mr Geithner was that the nominee’s private meetings with the committee had been almost entirely taken up with the personal tax issue. Mr Grassley last week voted against releasing the second half of the $700bn troubled asset relief programme to buy up toxic financial assets from banks, first authorised last October.

“The money has been erratically and arbitrarily distributed in a monstrous act of government intervention and ownership over our financial markets,” Mr Grassley told the committee. Nor was his criticism politically partisan: Mr Grassley had harsh words for Hank Paulson, the outgoing Treasury secretary. But since Mr Geithner was president of the New York Federal Reserve at the time, Mr Grassley felt his fingerprints were on the policy as well.

In the end, assuming he is confirmed, it is the questions about the billions being spent on the rescues for the banking system rather than the thousands that Mr Geithner missed on his taxes that are likely to dominate his time as Treasury secretary. But for those critical of the approach taken to resolving the worst financial crisis since the Great Depression, the nominee’s little local difficulties have given them an opening to press their concerns.

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