- The Washington Times - Wednesday, January 21, 2009


Treasury Secretary nominee Timothy Geithner apologized Wednesday for making “careless” and “avoidable mistakes” in failing to pay $34,000 in back taxes but said they were unintentional and asked the Senate Finance Committee for its trust and confidence in him.

He said he had paid all of his back taxes.

Mr. Geithner appeared for nearly four hours before the testy Senate panel for confirmation of his nomination by President Obama, who has dismissed the self-employment payroll tax controversy as a minor distraction. Mr. Obama said Mr. Geithner’s experience in handling the nation’s financial crisis was more important.

Paul Volcker, who served as Federal Reserve chairman from 1979 to 1987, testified in favor of Mr. Geithner’s nomination, saying, “We’re in the midst of the mother of all financial crises.”

As head of the Federal Reserve’s New York regional bank, Mr. Geithner, 47, assisted the Bush administration’s Treasury secretary, Henry Paulson, and Federal Reserve Chairman Ben S. Bernanke in dealing with the crisis, including the administration’s request to Congress for $700 billion in bailout money for the banks.

“These were careless mistakes,” Mr. Geithner said of his failure to pay the IRS self-employment taxes for the money he earned from 2001 to 2004 from the International Monetary Fund. “They were avoidable mistakes. They were unintentional.”

He said he thought he was an IMF employee and, as such, received the annual W-2 form that declares how much salary an employer pays.

“I want to apologize to the committee for having to spend so much time” on dealing with the tax issue, he said. “I will do everything I can to justify your trust and your confidence.”

Mr. Geithner paid some of the taxes in 2006 after an IRS audit showed he failed to pay them for 2003 and 2004, but he waited to pay back taxes he owed for 2001 and 2002 until just before Mr. Obama chose him in November to head the Treasury Department.

Sen. John Kyl, Arizona Republican and minority whip, homed in on Mr. Geithner’s failure to pay the taxes owed for all four years in 2006 when he paid the IRS for only two years.

He repeatedly pressed the nominee about whether he had paid the 2003-04 taxes in November only because he knew Mr. Obama was going to nominate him for Treasury secretary. Or did he deliberately not pay the taxes because he knew the statute of limitations on that two-year period had expired?

“That was the first time (during the nomination vetting process by Mr. Obama’s staff) that I thought carefully about whether I should go back and cover that,” Mr. Geithner replied.

“Did you rely on the statute of limitations,” or did you wait “until it was brought to your attention … before you were nominated?” Mr. Kyl asked.

“I did not believe that I had an obligation to go back. I didn’t think about that until the vetting process… . I would never put myself in the position of not meeting my obligations as an American taxpayer,” he said.

Mr. Kyl waved an IRS tax allowance application that Mr. Geithner had signed and said it seemed implausible to him how the Federal Reserve official could have made mistakes and could not have understood how the mistakes were made.

“I had many opportunities to see [the mistake], but I kept making the mistake,” Mr. Geithner replied. “If I had not made the mistake initially, I would have corrected it. I thought I was complying at that point, and that’s why I signed [the form]… . I wrote a check every quarter [to the IRS] thinking that it covered my obligations.

In his prepared remarks before the committee, Mr. Geithner emphasized that the Obama administration will seek to reform the financial sector, including tighter regulation, to create a “stronger, more resilient system” and provide “much stronger tools to respond to crises.”

The financial system, he said, “was too fragile and unstable and, because of this, the system was unjust” to the people who were not involved in the failures of the banking and brokerage sectors of the economy.

Fixing the financial system will “require action that has not been seen in generations,” Mr. Geithner said.

The United States, he said, is at a “critical moment in our nation’s history.”

Under questioning from Sen. Ron Wyden, Oregon Democrat, Mr. Geithner said the financial collapse occurred because of a “failure of checks and balances in the system” that will “require very substantial reform” to correct.

He said there had been “too much skepticism about supervision across the system” and that “supervision could have been more effective.”

“Could your supervision have been more effective”? Mr. Wyden asked.

“Absolutely,” Mr. Geithner replied.

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