Senate panel delays Geithner hearing

WASHINGTON (Reuters) - A U.S. Senate panel on Wednesday delayed a hearing on Timothy Geithner, President-elect Barack Obama's choice to head the Treasury Department, amid controversy over back taxes and the immigration status of a former housekeeper.

Some members of the Senate Finance Committee, which has jurisdiction over the nomination, voiced support for Geithner, who as president of the New York Federal Reserve Bank has played a big role in efforts to calm roiled financial markets.

"He'll clearly get confirmed, clearly. That's a given," Senate Finance Committee Chairman Max Baucus told reporters on Capitol Hill.

Still, the delay in the hearing, which Baucus had hoped to hold this week, likely will mean Obama will enter office next Tuesday without a battle-tested Treasury secretary at his side during the worst U.S. economic crisis since World War II.

Some Republicans said they were withholding judgment on Geithner, whose nomination in November was greeted warmly by financial markets, but others voiced support.

"With a position as important as this one, where he's needed immediately, and keep him out for some error he made 10 years ago and has long been fixed, doesn't make sense," Republican Sen. Robert Bennett of Utah said.

Baucus, a Montana Democrat, rescheduled the hearing until January 21 -- the day after Obama is sworn in as president -- after panel members objected to earlier plans for a Friday hearing. If the objections were lifted, the hearing could proceed as planned, the committee said in a statement.

The flap over Geithner's back taxes and his domestic help boiled over on Tuesday when he met with Finance Committee members to explain his failure to fully pay several years worth of Medicare and Social Security taxes and the lapse of a housekeeper's work papers during her employment by his family.

Obama aides have characterized the errors as honest mistakes, and Geithner has amended his tax returns to repay about $42,700 in back taxes and interest.

JUDGMENT WITHHELD

Sen. Charles Grassley, the top Republican on the finance panel, said members "needed time to reflect" on the tax matter before considering the nomination, which must be approved by the full Senate.

The Iowa Republican told CNBC television he would not make his mind up on whether to support Geithner until after next week's hearing. "If this hadn't come up ... this would have been handled very quickly," he said.

However, another Republican panel member, Sen. Orrin Hatch of Utah, said Geithner was still worthy of support.

"He made some mistakes that he is embarrassed by," Hatch said. "But that doesn't diminish the fact that he's an excellent choice for this position ... I think he will make it."

Even if he wins confirmation, the tax matter could complicate his dealings with some lawmakers on Capitol Hill.

Sen. George Voinovich, an Ohio Republican, said it was "a very bad thing" for someone chosen to run the Treasury, which oversees tax collection, to have failed to pay some taxes. "He's got a real problem with me," he said.

Any delay in Geithner's confirmation by the Senate -- or any chance that he might withdraw -- could unnerve investors at a time when the banking sector is weak, lending scarce and the economy in a deepening recession.

Geithner is expected to be a key salesman for Obama's request for Congress to release a second $350 billion in federal financial bailout funds, as well as for his economic stimulus plan, which could result in up to $800 billion in tax cuts and new spending.

(Additional reporting by Mark Felsenthal, Thomas Ferraro, Richard Cowan and Donna Smith; Editing by Andrea Ricci)