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What Will Become of Geithner?

5:35 PM, Jan 14, 2009 • By MARY KATHARINE HAM
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In the face of news that Obama's nominee for Treasury Secretary Tim Geithner failed to pay more than $30,000 in taxes in the early part of the decade and briefly employed an illegal housekeeper, the President-Elect and forces on the Hill are sending mixed signals on the fate of his nomination. His hearing has been pushed from Friday to next Wednesday.

The Obama team, which has presided over an "otherwise smooth" transition, claims it knew of Geithner's tax troubles before he was nominated, and determined they were honest mistakes that should not keep him from the office. The Senate Finance Committee began investigating the tax dodging on Dec. 5, interviewing Geithner and several of his accountants. Geithner, who would oversee the IRS, was doing his own taxes during the years in question.

He failed to pay his Social Security taxes when employed by the International Monetary Fund, despite being given documentation that indicated he was required to do so. He also used "overnight camp" payments in calculating his dependent child credits for three years, and was informed by his accountant after the fact that the practice was not allowed. He did not file amendments to correct his mistakes, nor did he pay much of what he owed in back taxes until after he was nominated in November.

Obama himself has stepped out to offer explicit support for Geithner in the wake of the news breaking:

"My expectation is that Tim Geithner will be confirmed and my expectation is that he's going to do an outstanding job," Obama told reporters after a meeting with vice president-elect Joe Biden and South Carolina Sen. Lindsey Graham to discuss their recent trip to Iraq and Afghanistan.

Obama said Geithner, currently the president of the New York Federal Reserve Bank, had been praised by Democrats, Republicans and financial markets as uniquely qualified for his new post during a recession and U.S. financial crisis.

"Is this an embarrassment for him? Yes. He's said so himself," Obama said of Geithner's tax issues.

Not an embarrassment for Obama, of course. Only Geithner, whose mistakes represent only a slight bump in the "exceedingly smooth" transition.

Early indications show Geithner may indeed be in the clear, as Senators fret over the idea of having no one in place at Treasury from the get-go during these rough economic times:

So far anyway, some Senate Democrats, and a few key Republicans, agree. Finance Committee Chairman Max Baucus (D-Mont.) said the revelations did not disqualify Geithner, and he said it was crucial for Obama to have a new Treasury secretary in place when he takes office next week. Sen. Orrin G. Hatch (R-Utah) said he still supports Geithner.

Iowa Sen. Charles Grassley (R-Iowa), the ranking member on the Finance Committee, has privately questioned whether Geithner's problems should derail his nomination and so far has refused to comment publicly.

A full-on P.R. press from Team Obama is being well-received by some on the Hill

The talking points noted that Geithner had paid off all of his back taxes - although nearly $26,000 of them weren't paid until November, just before his nomination went to the Senate Finance Committee for official review.

The talking points also said that the legal status of Geithner's former housekeeper didn't lapse until the last three months of her employment.

I'm not sure what difference it makes for how long Geithner's housekeeper was illegal, nor am I at all confident that if I ever have tax troubles to the tune of 40K, they will be referred to as "hiccups," "mishaps," or "honest mistakes."