Geithner wins OK for U.S. Treasury despite tax woes

WASHINGTON Mon Jan 26, 2009 11:50pm GMT

New York Federal Reserve Bank President Timothy Geithner, U.S. President Barack Obama's nominee for Treasury Secretary, testifies at his confirmation hearing before the Senate Finance Committee on Capitol Hill in Washington, in this January 21, 2009 file photo. REUTERS/Brian Snyder/Files

New York Federal Reserve Bank President Timothy Geithner, U.S. President Barack Obama's nominee for Treasury Secretary, testifies at his confirmation hearing before the Senate Finance Committee on Capitol Hill in Washington, in this January 21, 2009 file photo.

Credit: Reuters/Brian Snyder/Files

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WASHINGTON (Reuters) - Timothy Geithner won confirmation as U.S. Treasury secretary on Monday as the U.S. Senate set aside misgivings about his past income tax problems in light of his experience battling the financial crisis.

Geithner, 47, was expected to be sworn in quickly to help lead President Barack Obama's efforts to stabilise a worsening economy. The Senate approved his nomination on a 60-34 vote.

With the U.S. economy in full-blown crisis, Geithner's experience in dealing with the past year's rapid-fire rescues of key financial firms trumped the taint from his late payment of $34,000 (24,287 pounds) in self-employment taxes when he worked at the International Monetary Fund earlier this decade.

The new Treasury chief is expected to soon unveil reforms to the United States' $700 billion financial bailout program to provide more support for housing and credit markets, and possibly a new effort to absorb troubled assets from banks.

"I would rather have a battle hardened veteran at the helm who knows the shoals and whirlpools than a neophyte who has to wade into these churning waters for the first time," Republican Sen. Orrin Hatch of Utah said during debate on the nomination.

But some lawmakers were disturbed enough by the tax lapse to vote against Geithner even though they thought him well suited for the job otherwise.

MANAGING A CRISIS

Geithner, who has been president of the New York Federal Reserve Bank since 2003, has now joined a new administration already deeply involved in pushing a package of spending and tax-cuts through Congress to lift the recession-mired economy.

At a congressional hearing on his nomination last week, he pledged an overhaul of the government's crisis response that would aim to ease the housing crisis, aid consumer credit markets and shore up the banking system.

He also vowed a greater effort to track what banks are doing with the taxpayer-supplied funds that are being bundled out by Treasury. Many lawmakers have complained that banks have not used the funds to increase their lending.

"On the challenges, they are monumental and extraordinary. But this is going to be more than a one-man show, this is going to be a whole team effort by Treasury and by the administration," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities.

FAMILIAR TURF

Geithner's route to Treasury secretary initially appeared all smooth sailing until revelations that he had underpaid taxes for several years. He apologized for the errors, calling them "careless" but taking some stripes for it from lawmakers.

Geithner has a long-standing familiarity with the Treasury Department. His service there dates back to 1988 when he began a climb upward to undersecretary for international affairs from 1998 to 2001 under former Treasury Secretaries Robert Rubin and Lawrence Summers during the Clinton administration.

After stints at the Council on Foreign Relations and the International Monetary Fund, Geithner was named president of the New York Fed in November 2003.

As the head of the New York Fed, Geithner had his hand in a series of emergency actions by the Treasury and Fed to rescue failing financial firms.

(Editing by Neil Stempleman)

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