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UPDATE 1-Geithner seen winning Treasury job despite tax woes

(Recasts with start of debate, senators’ comments)

WASHINGTON, Jan 26 (Reuters) - The U.S. Senate on Monday opened debate on the nomination of Timothy Geithner to be U.S. Treasury secretary and appeared poised to confirm him despite misgivings about his failure to pay some taxes.

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 in self-employment taxes in the eyes of many lawmakers.

“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,” said Republican Sen. Orrin Hatch of Utah.

But Sen. James Inhofe, an Oklahoma Republican, said he could not support Geithner because of the tax issue and his disagreement with nominee’s involvement in government bailouts of financial firms.

“The government has gone too far and under Mr. Geithner all indications are that we are not going to slow down any time soon,” Inhofe said.

The Senate, which must approve the nomination, was scheduled to vote at about 6 p.m. (2300 GMT).

MANAGING A CRISIS

The 47-year-old Geithner will be President Barack Obama’s top economic official and will help lead a crisis-management team that is already deeply involved in pushing a package of spending and tax-cuts through Congress to lift the recession-mired economy.

He also will immediately face the question of whether the new administration should go back to Congress to seek money beyond the Treasury-run $700 billion financial rescue package to sop up bad assets sitting on bank balance sheets, perhaps in a government-run “bad bank.”

“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.

At a congressional hearing on his nomination last week, Geithner 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.

FAMILIAR TURF

Geithner’s route to Treasury secretary initially appeared all smooth sailing until revelations that he had underpaid taxes for several years while he worked for the International Monetary Fund earlier in the decade.

He apologized for the errors, calling them “careless” but taking some stripes for it from some lawmakers.

Geithner has a long-standing familiarity with Treasury. His service there dates back to 1988 when he began a climb upward to under secretary 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 served as vice chairman and a permanent voting member of the U.S. central bank’s policy-setting committee. He also had his hand in a series of emergency actions by the Treasury and Fed to rescue failing financial firms. (Editing by Andrea Ricci)

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