* Geithner: Aim is to stabilize housing, strengthen banks
* Treasury nominee Geithner apologizes for tax "mistakes"
* Geithner vows reforms for $700 billion bailout program
(Recasts; adds quotes)
By David Lawder
WASHINGTON, Jan 21 U.S. President Barack Obama
will lay out a comprehensive plan in the next few weeks to
attack the worst financial crisis since the Great Depression,
Timothy Geithner, his nominee to head the U.S. Treasury, said
At a Senate confirmation hearing at which he apologized for
a lapse in paying more than $34,000 in taxes earlier this
decade, Geithner sketched out a multi-pronged approach to
stabilize housing, strengthen banks and support consumer credit
to help the economy break free of a year-long recession.
"What the president is going to do is he's going to come
before the Congress, we hope in the next few weeks, and lay out
for the American people a comprehensive plan to help stabilize
the core of our financial system," Geithner told the Senate
Geithner, who in his current job as president of the New
York Federal Reserve Bank has been a key participant in
government efforts to prop up financial markets, declined to
provide specifics, saying details had yet to be worked out.
"We've seen the costs, in terms of uncertainty created by
tentative signals not followed up by clear actions," he said.
For highlights, [ID:nN21260357]
Geithner's comments disappointed some investors, who had
hoped the administration would move more quickly to help banks
unload a mountain of bad debt, and briefly pushed stocks into
negative territory before a big late-day rally.
"To expect that Timothy Geithner or any one else in the new
team would have a comprehensive plan to revert this crisis in
less than 24 hours after the start of the new administration,
is a cheap shot," said Roger Kubarych, chief U.S. economist
with Unicredit Markets and Investment Banking in New York. "It
is true that the team was formed a couple of months ago and
they've been tackling the issue but people forget this is a new
Congress and any plan needs to be approved by the very same
senators that are now grilling Geithner."
Geithner said the new administration was reviewing a "broad
range of proposals," including the option of setting up a
government-run "bad bank" to take toxic assets off banks'
books. The United States took a similar approach to resolve the
savings and loan crisis of the late 1980s and early 1990s.
He said the retooling of the government's $700 billion
financial rescue program would tackle the housing crisis and
involve "much more substantial direct support to credit
markets" so lending can resume to small businesses, car buyers,
college students and real estate markets.
Geithner faced sharp questioning over his failure to pay
about $34,000 in self-employment taxes when he worked for the
International Monetary Fund earlier this decade, and issued a
"These were careless mistakes. They were avoidable
mistakes. But they were unintentional," Geithner said. "I want
to apologize to the committee for putting you in the position
of having to spend so much time on these issues."
Geithner paid back taxes and interest for 2003 and 2004
after an Internal Revenue Service audit. While he made the same
tax error in 2001 and 2002, he did not pay back taxes for those
years until after Obama expressed interest in nominating him.
"It strains credulity to think that it didn't immediately
occur to you that you had that liability for the whole time
that you were at the IMF," Sen. Jon Kyl of Arizona, the No. 2
Republican in the Senate, told Geithner.
Despite the flap over his taxes, which was seen as
particularly problematic since the IRS is part of the Treasury
Department, Geithner was expected to win Senate approval.
"You're going to be confirmed," Republican Sen. Pat Roberts of
The committee scheduled a vote on his nomination for 10
a.m. (1500 GMT) on Thursday, which could put Geithner on track
to win the needed backing of the full Senate by the end of the
BAILOUT PROGRAM REFORM
Geithner told lawmakers, many of whom are upset at how the
government's financial rescue program has been run, that the
Obama administration would require banks receiving government
money to document increased lending.
"We have to fundamentally reform this program to ensure
that there is enough credit available to support recovery,"
said Geithner, who played a central role in the government's
decisions to organize an orderly sale of failing investment
bank Bear Stearns and to shield insurer American International
Group from collapse.
Asked about government support for the auto sector, which
has received funds from the program, he said the administration
was in the process of assembling restructuring and
manufacturing experts to study labor contracts and come up with
changes to the program that would strengthen the industry.
Geithner did not make any direct comments on the Treasury's
longstanding policy in support of a strong dollar, but said he
would work to ensure that trading partners, particularly China,
would pursue flexible currency regimes. [ID:nN21486527]
"Our interests as a nation lie in trying to make sure China
manages its transition as effectively as possible, with least
potential damage and risk to the global economy," he said. "It
is going to require a very substantial sustained engagement."
(Additional reporting by Alister Bull, Mark Felsenthal, Emily
Kaiser, Lucia Mutikani and Nancy Waitz; Editing by Leslie