Timothy Geithner, when at the Fed in New York, orchestrated hundreds of billions of dollars in bailout monies that have fallen into unknown nooks and crannies in our banking system. He presided over the demise of Lehman Brothers, which many now blame for the complete meltdown in our financial system. And he approved a bailout for AIG, which is regarded by Democrats and Republicans alike as a mistake. But if he fails to be confirmed as Treasury Secretary it won’t be because of any of that.
It will be because he has what has come to be generically called a “nanny problem,” but in his case is actually housekeeper problem. That is, he had a housekeeper whose work authorization expired. Oh, and he failed to pay self-employment taxes for himself for the time he worked at the IMF. In 2006 he was forced to pay back taxes for 2003 and 2004. In December 2008 when the Obama team discovered additional years ( 2001 and 2002) of non-payment, Geithner made further repayments (including interest) to the IRS. In total, he had to pay over $42,000 in back taxes and interest.
Is he toast? If he were a Republican the answer would surely be yes. We’ll have to see whether he and the Obama team can get away with it. (The blogspheric cheerleaders are already assuring us it is but a “hiccup.”) This, of course, brings us to the bigger issue: what the heck is wrong with the Obama vetting process?
One strike on Bill Richardson. Two strikes on this — the transition team found the housekeeper problem and the “error” for additional years of nonpayment and arranged for the tax repayment back on December 5. But they seemed not to have appreciated the impact tax nonpayment would have on the confirmation prospects of a Treasury Secretary. (Actually this sounds strangely similar to the Richardson case, in which the problem really was or should have been known.) Why do we get to the eve of the hearing (now canceled) without this fully surfacing?
And there’s a little troubling detail in all of this. Why didn’t Geithner pay all the back taxes when audited in 2006? The Wall Street Journal explains:
As to why Mr. Geithner didn’t pay all his back taxes after the 2006 audit, an Obama aide said the nominee was advised by his accountant that he had no further liability. Senate Finance Committee aides said they were concerned that either Mr. Geithner or his accountant had used the IRS’s statute of limitations to avoid further back-tax payments at the time of the audit. “Some might say it was a character moment,” said one Republican aide.
Even Maureen Dowd is miffed:
How does a guy on the fast track to be Treasury secretary fail to pay $43,200 worth of federal taxes, or forget to check on the immigration status of a house cleaner — the same sort of upstairs-downstairs slipup that has tripped up other top-drawer prospects on their way to top jobs here? Americans expect the man who’s in charge of the I.R.S. to pay his own taxes.
Geithner’s transgressions may seem petty given the kind of transgressions that have taken place in the Bush administration, and given the dire warnings of Obama’s choice for budget director, Peter Orszag, that the end may be nigh if the U.S. continues to spend beyond its means.
But Obama has proselytized about a shiny new kind of politics, and it’s déjà vu all over again with the smart being dumb, the rich being greedy, the powerful being sketchy.
And, as one Capitol Hill aide noted, it doesn’t look great for the Democrats to have both their Treasury Secretary and their Ways and Means Chairman seemingly unable to comply with routine tax laws. More practically, it sets up every other Obama nominee to enter hearings with heightened awareness and concern by Senators that the vetters didn’t fully vet or weren’t entirely candid.
Bottom line: whether or not Geithner survives, the air of competence surrounding the new administration is a precious thing and shouldn’t be frittered away like this. Certainly this was one more unforced error the new team did not need. One wonders if this is indicative of a regrettable pattern or simply the final bobble as the Obama administration gets its sea legs. But, wait. The Eric Holder hearing — which may be the bloodiest of them all — is still ahead. So much for the honeymoon.