Looking Back at Tim Geithner

Zero Hedge (LINK) points us tonight to a surprising bit of dialogue between FOMC member Jeffrey Lacker and then-Vice Chairman (and head of the NY Fed) Tim Geithner, from pages 14-15 of the following (LINK), which is to August 2007 minutes of the FOMC meeting in which I have previously dated the great, global financial crisis to have begun:

MR. LACKER. If I could just follow up on that, Mr. Chairman.
CHAIRMAN BERNANKE. Yes, go ahead.
MR. LACKER. Vice Chairman Geithner, did you say that they are unaware of what we’re considering or what we might be doing with the discount rate?
VICE CHAIRMAN GEITHNER. Yes.
MR. LACKER. Vice Chairman Geithner, I spoke with Ken Lewis, President and CEO of Bank of America, this afternoon, and he said that he appreciated what Tim Geithner was arranging by way of changes in the discount facility. So my information is different from that.
CHAIRMAN BERNANKE. Okay. Thank you. Go ahead, Vice Chairman Geithner.
VICE CHAIRMAN GEITHNER. Well, I cannot speak for Ken Lewis, but I think they have sought to see whether they could understand a little more clearly the scope of their rights and our current policy with respect to the window. The only thing I’ve done is to try to help them understand—and I’m sure that’s been true across the System—what the scope of that is because these people generally don’t use the window and they don’t really understand in some sense what it’s about.
CHAIRMAN BERNANKE. Okay. President Rosengren. 

There was no on-the-record further discussion of this, at least on the contiguous page.  Hmmm...

I began this blog in December 2008 in large part from disappointment that President-elect Obama had nominated Mr. Geithner to head up Treasury.  (There was not even a Zero Hedge yet.)  My position was based on his role as bailout-er, but then another issue surfaced.  Treasury contains IRS, and it turned out that Mr. Geithner had been challenged on his taxes.  This is what I first wrote about him, after the news broke (LINK):

TUESDAY, JANUARY 13, 2009 

Trust and a State 

You could not make this one up. Forget Zoe Baird (a Clinton AG nominee who was dropped because she had employed an "undocumented" nanny).
Mr. Timothy Geithner has been revealed to be a tax cheat of the first order. The Times hates to point it out, but has to spit it out, probably in return for a scoop. After an IRS audit showed that he underpaid his taxes by up to $17K for his 2003/4 returns, it turns out that the same "mistake" causing those returns to be a wee bit short were also present in 2001 and 2002. (You really can't make this up.)
When were the 2001-2 errors found? Last year, when Mr. Obama's "vetters" found the problem and "brought it to Mr. Geithner's attention", after which he paid tax and interest of $25,970.
So Mr. Obama has sat on this knowledge for 2 months and could not find anyone else in the entire US of A to be head of the Treasury Department. Which is in charge of the IRS, one might recall. So the Cabinet member in charge of the IRS is a tax cheat and this is just fine with Mr. Obama.
Recently, my wife did her part to combat the recession by giving the girls down the street some work making her nails gleam and glisten. One of those gals was Russian. She exclaimed with some emotion that in Russia, they knew the higher-ups stole, but they did not expect the same out of America. Her eyes are now open. And so are ours.
What does this have to do with markets and the economy?
Everything.

This was my next comment (LINK):

TUESDAY, JANUARY 13, 2009

          Geithner II (follow-up to "Trust and a State")

It doth worsen. The WSJ-online provides add'l details to the Times' article on Mr. Geithner's aggressive use of the tax code tonight in, "Geithner's Tax History Muddles Confirmation".
Read it and weep. Sleepaway camp? Some juicy extracts:
"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 he had no further liability. Senate Finance aides said they were concerned either Mr. Geithner or his accountant used the IRS's statute of limitations to avoid further back-tax payments at the time of the audit."
"Other tax issues also surfaced during the vetting, including the fact Mr. Geithner used his child's time at overnight camps in 2001, 2004 and 2005 to calculate dependent-care tax deductions. Sleepaway camps don't qualify."
"Amended tax returns that Mr. Geithner filed recently include $4,334 in additional taxes, and $1,232 in interest for infractions, such as an early-withdrawal penalty from a retirement plan, an improper small-business deduction, a charitable-contribution deduction for ineligible items, and the expensing of utility costs that went for personal use."
As someone who has been tres critical of the bailout(s), the secrecy, and the general incompetence of Government that allowed the crises to fester and then explode (and continue to fester), I have felt that the choice of Mr. Geithner was a sign that the new Administration would show continuity with the old, and that this was a bad thing for resolution of the problems.
Mr. Obama, take down this nominee. Real change is needed. Here's your excuse to do it.

And my next one (LINK):

WEDNESDAY, JANUARY 14, 2009 

Geithner Must Go (Not Arrive)

The New York Times continues to push to make the appointment of Mr. Timothy Geithner appear inevitable. Its latest writeup is titled, "Geithner's Skill May Trump Tax Issue".
There is something wrong with this title. What is wrong is that everything important that Mr. Geithner has been involved with in the past year has failed. So where is the skill?
There is a howler in the Times article. What do you make of this part of it?
"On Oct. 17, at a New York hotel, Mr. Obama and Mr. Geithner met for an hour and talked about policy and personal matters, according to accounts of the session. . ."
"Obama advisers say the candidate “fell in love” with Mr. Geithner, in the words of one, while a Geithner associate said Mr. Geithner reported being “smitten” with Mr. Obama. “They both have that kind of quiet confidence in their demeanor,” the associate said."
DoctoRx here. "Fell in love" and "smitten"? Is this Brokeback Mountain come to the Potomac?
In any case, Mr. Geithner is a failure at his current job and a tax cheat. For him to become Treasury Secretary would be bad for the economy. It doesn't matter whether Mr. Obama loves him or how many Senators rally round him.

And the final one on Mr. Geithner (LINK):

THURSDAY, JANUARY 15, 2009 

Geithner Follow-Up 

The WSJ is reporting as of its Jan. 15 edition in "IMF Informed Geithner on Taxes":
"Timothy Geithner, whose nomination as Treasury secretary has been delayed by his past failure to pay taxes, was repeatedly advised in writing by the International Monetary Fund that he would be responsible for any Social Security and Medicare taxes he owed on income he earned at the IMF between 2001 and 2004."
His nomination may be toast.

Wrong!

Here's one more related post (LINK):
Here is the title:

SATURDAY, JANUARY 31, 2009I Second That Evasion: Tom Underpays Tim

And the most cogent part of a relatively long post:

Here is the Times' headline:

"Use of Free Car Lands Tom Daschle in Tax Trouble"

DoctoRx here: Doesn't sound too bad, does it? Perhaps just a forgotten couple of limo rides? 

President Obama's pick for health and human services secretary, Tom Daschle, failed to pay more than $128,000 in taxes, partly for free use of a car and driver that had been provided to him by a prominent businessman and Democratic fund-raiser, administration officials said Friday.
Note the word "partly", whichindicates that the headline of the article was too easy on Mr. Daschle, and also note that $128,000 far exceeds Treasury Secretary Tim Geithner's tax underpayments.
Mr. Daschle, concluding that he owed the taxes, filed amended returns and paid more than $140,000 in back taxes and interest on Jan. 2, the officials said. 

At least Mr. Daschle stayed in the private sector.

Baby, It's Cold Everywhere

This blog has taken a special interest in former Majority Leader Daschle's nomination for Secretary of Health and Human Services, due to my background in actually providing health care for humans.

It was initially thought here that the coup de grace would be the revelation that even after Mr. Daschle paid his back taxes, he neglected to pay his Medicare surtax of 2.9%. Doesn't he know? He voted for that revenue raiser as a Senator.

Questions have been raised about both the thoroughness of the Obama team's vetting process and the President's interest in hewing strictly to his theme of ultra-high ethical standards.

Before Mr. Daschle resigned today, Nancy Killefer withdrew her candidacy for first chief performance officer for the federal government. Here is her situation, as reported by the Huffington Post.

The AP reported that on March 7, 2005, the D.C. Department of Employment Services slapped a tax lien on her home in the upscale Wesley Heights neighborhood. The local government alleged that beginning three years after she left the high-powered Treasury post she failed to pay unemployment compensation tax for a household employee. She failed to make the required quarterly payments for a year and half, the D.C. government said, whereupon a lien for $946.69 was placed on her home.

That sum included $298 in unpaid taxes, $48.69 in interest and $600 in penalties. Killefer didn't get the lien extinguished for almost five months, until July 29, 2005.

During that period, Killefer and her husband, an economics professor, had two nannies to help care for their teenage son and daughter, and she had a personal assistant to run things when she was on the road, she told Harvard business students back then.
Bobby Tucker, chief of D.C.'s unemployment insurance tax division, said filing tax liens is "not a common practice" for his office. D.C. law authorizes such liens when an employer "neglects and refuses" to pay the levy that helps pay for unemployment benefits for those laid off or fired. Tucker said his auditors have discretion to use tax liens based on "the number of attempts to collect contributions owed, whether or not the employer responds to written attempts, phone calls and-or in-person visits" to collect the tax.

From today's Huffpo update:

It wasn't clear whether the administration was aware of Killefer's tax errors before Obama named her. Gibbs refused to say what administration vetters knew about the problem or when. Gibbs maintained that Obama has confidence in the vetting system. But late on the day Killefer was first named, an administration official asked an AP reporter how the AP had found the tax lien against her.

Not encouraging. Here we have the Treasury Secretary, for whom Mr. Obama fought hard, overseeing the IRS despite being a tax chiseler/cheat/ignoramus; the health care czar/presumptive HHS Secretary, who had Mr. Obama's full and repeated support as recently as yesterday; and the first "chief performance officer" of the Federal Government, all bloodied over tax issues.

Both the "stimulus" program and the bank rescue program are floundering. Different trial balloons and senatorial proposals come and go. Gone are the heady days after the election in which giddy Democrats agreed to work day and night to get a stimulus bill to the new President on or around Inauguration Day.

This blog has consistently argued that on the core financial matters of the day, which are the Great Recession and the insolvency of the money-center financial institutions, the Obama Administration was going to be similar to the Bush team. So it has gone. There was no plan other than to follow the Bush-Reid-Pelosi plan of last year to give a one-time tax break and to fiddle while the banks burned, and to also include a large amount of spending that is both unfunded and for the most part in line with traditional and modern Democratic priorities but is not customized to stimulate. And so the markets continue to meander; the hoped-for Obama-mania/FDR-JFK-style inspiration peaked on or before Election Day, perhaps when Mr. Obama began acting like the economic affairs President before he was inaugurated, and as usual, economic reality drives the markets. Hope is rapidly fading that Barack Obama can make the recessionary tides recede other than on their own pace. In the meantime, please ask yourself what to do with your money when you just know that Citigroup and Bank of America are insolvent, and Wells Fargo and JPMorgan Chase may be as well.

Barack Obama said on the campaign trail that Americans would have to tighten their belts. He should continue on that theme, especially now that Mr. Bush still is blamed by the public for the economy. We need an old-style capitalist society built on saving, not consumption, and therefore on equity, not debt. If Mr. Obama, who by multiple accounts is quite a bright and well-informed President, can propound that theme over and over again, he will find a receptive public. The rest will fall in place, no matter exactly what is done to the banks.

Copyright (C) Long Lake LLC 2009

I Second That Evasion: Follow-Up You Could Not Make Up

The repeated ironies and hypocrisies are too delicious to resist, so herewith follows a brief post on the Daschle tax holiday flap. From Bloomberg.com's Daschle Raised Tax Question in June, Finance Report Says comes the detail that one could not invent:

Medicare Payments Due

The former senator has agreed that he will have to adjust again his 2005, 2006 and 2007 tax returns because he didn’t pay Medicare taxes on the additional taxable income he incurred with the use of the car, the Finance Committee staff reported.

As Health and Human Services secretary, Daschle would oversee Medicare, the insurance program for the elderly and disabled.

As a reminder, Mr. Daschle apparently consulted with his accountant in June 2007 because the former Senator suspected that the private use of a chauffered limo was in fact a taxable service, paid back taxes and interest in January 2008 after being nominated for Secretary of Health and Human Services, but no one noticed the continued underpayment (!?).

There is a wild and crazy pattern here. Mr. Obama feels that only a tax evader, Mr. Timothy Geithner, is the right person to run the Treasury Department; by far the greatest number of Treasury employees work for the Internal Revenue Service. Now, Mr. Obama feels that despite having no special expertise in healthcare policy, the right person to run HHS is Mr. Daschle, a lawyer who, despite having an accountant, was apparently unaware that there is a 2.9% surtax on earned income allegedly to finance Medicare.

Not to forget, but the new Secretary of State famously shot her Presidential candidacy in the foot when she repeatedly told the untrue story about landing in Bosnia under sniper fire as First Lady.

Next, to replace Mr. Gates as Defense Secretary, a draft dodger?

Copyright (C) Long Lake LLC 2009