Kyl Sends Geithner Off With Tough Beating On Botched Taxes
2:00 P.M.: Treasury Secretary-designee Tim Geithner's confirmation hearing before the Senate Banking committee just wrapped up (nearly four hours long) with a long exchange Sen. Jon Kyl (R-Ariz.) and Geithner over his botched taxes while working at the IMF, resulting in a tax mistake of more than $40,000.
It was about a 20-question exchange that could best be described as restrained but intense. Unlike Sen. Jim Bunning's (R-Ky.) attack on Geithner's handling of his taxes, which was mostly bombast, Kyl's was more surgical, as he tried to get Geithner to admit to one thing: You made the same mistakes on your 2001 and 2002 taxes as you did on your 2003 and 2004 taxes, which you corrected -- at any time before being asked to be Treasury secretary did you think to go back and pay your back taxes from '01 and '02?
In other words, would you have come clean on your whole tax bill had you not been selected to be Treasury secretary?
It was a tight and tough dance, sort of like two very polite knife-fighters in a phone booth.
Geithner's position was that, once audited by the IRS over his '03 and '04 taxes, he paid what the IRS told him he owed and was told by the IRS he had settled his obligation.
Kyl kept trying to figure out if Geithner knew he had botched his 2001 and '02 taxes as well but may be able to avoid paying what he owed on them: "Isn't it a fact that you immediately or very quickly realized that the same mistake you made in 2003 and '04 was probably made in '01 and 02 but the statute of limitations had run out and you didn't have to pay taxes for the other years?"
Geithner responded the same way as he had all day: It was a mistake, the IRS told me I had fulfilled my obligation, I should have caught it.
Kyl then gave into his frustration and got a little bit of what he wanted from Geithner.
"Would you answer my question rather than dancing around it, please?" Kyl pleaded. "The question is whether it occurred to you before you were nominated or approached to be nominated that, in point of fact, you didn't have to go beyond [your '03 and '04 taxes] because of the statute of limitations?"
Geithner said: "I did not believe I had the obligation to go back. I did not think about that until I was going through the vetting process....I had no occasion to think about it and I might not have thought about it had I not gone through the vetting process."
Geithner then, for the first time all day, dropped his mea culpa line and went on the offensive: "I did not believe I was avoiding my liability. I have worked in public service all my life. I grew up in government. I would never put my self in the position where I was intentionally not meeting my obligations as an American taxpayer."
Kyl concluded the hearing by reminded Geithner that he had been under oath the entire time and darkly suggested that if there was anything he'd said that he'd like to correct or amend, he was welcome to.
BUNNING HITS GEITHNER ON TAXES AGAIN:
12:49 P.M.: Sen. Jim Bunning (R-Ky.) just took another swipe at Treasury Secretary-designee Tim Geithner's botched taxes -- a more than $40,000 mistake on taxes he prepared himself using TurboTax -- at Geithner's confirmation hearing currently underway.
Bunning asked when Geithner first became aware of his mistakes and which years he did his own taxes and which years he hired an accountant. Bunning noted that the IMF goes to "great lengths" to inform its U.S. employees of their tax obligations.
Each time, Geithner delivered another mea culpa, saying the mistakes were his and his alone, that he depended on an accountant's judgment and shouldn't have, and that because he didn't catch his initial mistake, "I kept making it."
Pointedly, though, Bunning asked: "Would you have paid your '01 and '02 taxes had you not been nominated to be secretary of Treasury?"
It's worth noting that Geithner replied by repeating that the mistakes were his and his alone. What he did not say was, "Yes."
UPDATED WITH GEITHNER ON LEHMAN FAILURE:
12:30 P.M.: In his confirmation before the Senate Finance committee underway now, Treasury Secretary-designee Tim Geithner said that the federal government did not have the tools it needed to save investment house Lehman Brothers, which failed last fall.
"The failure was enormously consequential," Geithner said. "It didn't cause this financial crisis but it absolutely made things worse."
Geithner said that Lehman had "a need for capital on a scale that the market was unwilling to provide."
Congress had not given Treasury or the Fed the authority to pour enough money into Lehman to make private capital confident enough to invest its own money, Geithner said.
Hence, Lehman failed.
"It was a critical and tragic set of constraints," Geithner said, adding that the government should never have to enter a crisis like Lehman "without an adequate set of tools," hinting at his desire for broad authority as Treasury secretary.
UPDATED WITH BUNNING CRITICISM:
11:51 A.M.: Sen. Jim Bunning (R-Ky.) just lit into Treasury Secretary-designee Tim Geithner over his tax mistakes, saying Geithner "does not provide a satisfactory explanation for the problem and certainly not one [worthy] of a high-ranking public official."
Bunning said that as far as he knew, the relevant IRS personnel investigators who looked at Geithner's botched taxes have not been interviewed the Senate Finance committee.
Geithner as admitted to more than $40,000 worth of mistakes on his tax returns -- returns he prepared himself using TurboTax -- from his years of employment by the International Monetary Fund (IMF).
"The IMF clearly explained the payroll tax obligations," Bunning said. "Geithner's failuire to pay all of his taxes until he was to be nominated is hard to explain to my constituents who pay taxes on a regular basis."
The Ticker has put in a request to the TurboTax spokesperson to see what they have to say about Geithner's explanation. To wit: Would TurboTax have flagged his mistakes? We'll get back to you with TurboTax's response when it comes.
UPDATED WITH GEITHNER ON TURBO TAX:
11:03 A.M.: Under questioning before the Senate Finance committee, Treasury Secretary Tim Geithner was asked how he prepared his own taxes.
Sen. Chuck Grassley (R-Iowa) asked: "Did you use tax software to prepare your taxes?"
Geithner: "Yes, I did."
Grassley: "Which brand of tax software?"
Geithner: "I will answer that, but I want to say I take full responsibility....It was TurboTax."
GEITHNER ON HIS TAX MISTAKES:
10:46 A.M.: At the end of his prepared remarks, Treasury Secretary-designee Tim Geithner went off-script to address his $40,000 worth of tax return mistakes -- mistakes he made on returns he prepared.
This is Geithner's first public apology on the taxes.
Geithner called them "careless mistakes, avoidable mistakes, but they were unintentional. I should have been more careful. I take full responsibility for them. I have gone back and corrected the errors; I have paid what I owed. I want to apologize to the committee for putting them in the position of having to spend so much time on these issues when there is so much more pressing business before the country."
GRASSLEY: NATIONALIZATION IS 'MONSTROUS'
Sen. Chuck Grassley (R-Iowa), ranking member of the Senate Finance committee, which is holding the confirmation hearing of Treasury Secretary-designee Tim Geithner underway now, just explained why he voted against the second half of the $700 billion bailout/rescue after voting for the first half.
"Instead of using first half to buy troubled assets, the money has been erratically and arbitrarily distributed in a monstrous act of government intervention and ownership over our financial markets," unloaded Grassley, showing his bona fides as one of ARFM. (America's Remaining Free-Marketers)
Grassley is now turning his attention to Geithner's more than $40,000 in tax return mistakes -- returns he prepared himself.
"How much would the nominee's tax history reflect on the secretary?" Grassley asked. "How much does this troubled tax history reflect on his judgment?
Sen. Chuck Schumer (D-N.Y.) is now serving as a warm-up act for Geithner, giving a glowing recommendation with a little mea culpa peppered in.
"Tim has made some mistakes," Schumer said. But these mistakes "pale in comparison" to the misdeeds of Wall Street, Schumer said, invoking the popular lesser-sin defense.
January 21, 2009; 12:49 PM ET
Categories: The Ticker | Tags: Geithner
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