Tax and immigration blunders tripped up President-elect Barack Obama's highly regarded nominee for treasury secretary, arguably the most important position in the next Cabinet that assumes power in the midst of a spectacular U.S. economic downturn.
Timothy Geithner disclosed to senators Tuesday that he failed to pay $34,000 in taxes from 2001 to 2004, a last-minute complication in an otherwise smooth path to confirmation. Senate Democrats are pressing to schedule a quick confirmation hearing for Geithner on Friday, but Republicans have yet to sign off on expediting the hearing by the Senate Finance Committee.
The Geithner miscue proved another unwanted distraction for Obama, who was on Capitol Hill wrestling to build congressional consensus for his economic rescue efforts.
It was Obama's second trip to Congress since he returned from a Christmas holiday. His first mission pushed his $800 billion plan that melds federal spending and tax cuts. He was back on Tuesday arguing for the release of the second half of a $700 billion bailout package passed in September as several financial organizations failed or were on the verge of collapse.
Obama told senators on Tuesday he would veto legislation to block release of those funds while pledging that billions would go toward helping homeowners facing foreclosure. Several Democrats said his commitments, to be made in writing, would be sufficient to prevent an embarrassing pre-inauguration battle for the president-elect when the Senate votes this week. Obama will be sworn in on Tuesday.
"This will be the first vote that President-elect Obama is asking us for. I'll be shocked, and I'll be really disappointed if he doesn't get it," said Sen. Joseph Lieberman, a Connecticut independent who historically votes with Democrats. "This is a new beginning."
Obama was trying to overcome congressional ire over the Bush administration's use of the first half of the massive bailout measure. Critics claim the rescue money went disproportionately to big financial institutions, was not carefully accounted for and ignored the needs of homeowners at risk of losing their homes in foreclosures.
Obama stood by Geithner, as senators vetting his nomination questioned him behind closed doors.
"He's dedicated his career to our country and served with honor, intelligence and distinction," incoming White House spokesman Robert Gibbs said. "That service should not be tarnished by honest mistakes, which, upon learning of them, he quickly addressed."
"He made a common mistake on his taxes," Gibbs said in a statement.
Geithner failed to pay self-employment taxes for money he earned from 2001 to 2004 while working for the International Monetary Fund, according to materials released by the committee Tuesday.
He paid some of the taxes in 2006, after an Internal Revenue Service audit discovered the discrepancy for taxes paid in 2003 and 2004. But it was not until much later _ days before Obama tapped him to head Treasury late last year _ that Geithner paid back most of the taxes, incurred in 2001 and 2002. He did so after Obama's transition team found that Geithner had made the same tax mistake his first two years at the IMF as the one the IRS found he made during his last two years there.
The panel's report also noted that Geithner briefly employed a housekeeper in 2005 whose legal immigrant work status had lapsed.
Gibbs said Geithner "was unaware that his part-time housekeeper's work authorization expired for the last three months of her employment."
Geithner is the second Obama nominee to face controversy. New Mexico Gov. Bill Richardson withdrew his name on Jan. 4 as Obama's Commerce secretary after questions surfaced about an ongoing federal investigation into how his political donors landed a lucrative transportation contract.
Immigration issues have derailed presidential nominations in the past.
George W. Bush's choice for labor secretary in 2001, Linda Chavez, withdrew her nomination when word surfaced she had housed an illegal immigrant.
In 1993, Bill Clinton's first choice for attorney general, Zoe Baird, fell through when word leaked that she had hired illegal aliens as household workers and failed to pay their Social Security taxes. Clinton's next choice, federal judge Kimba Wood, didn't go forward after the disclosure that she had hired an illegal immigrant as a baby sitter.
Senior Democrats quickly signaled Tuesday that they would not let the revelations derail Geithner's nomination. Senate Majority Leader Harry Reid dismissed them as "a few little hiccups," and said "I'm not concerned at all" about its impact. He said Geithner is "extremely well qualified" to become treasury secretary.
Senate Finance Committee Chairman Max Baucus said he would move forward quickly with a confirmation hearing. While "disappointed" with Geithner's errors, Baucus said he was "satisfied" that they'd been addressed.
"We have to roll up our sleeves and get this economy moving again for the American people, and Tim Geithner has the right combination of experience and skill for these difficult economic times," Baucus said in a statement.
Senior Democrats expressed confidence that the disclosures would do little to slow Geithner's path to confirmation. At least one Republican, Sen. Orrin Hatch of Utah, said he had "no problem" with Geithner.
Still, the disclosures virtually guarantee a tough confirmation hearing for Geithner.
Republican Sen. Charles Grassley of Iowa, who pressed for the irregularities to be made public, has not said whether he considers them grounds for opposing Geithner's nomination.
Grassley regards the disclosure as "serious, and whether or not it's disqualifying is to be determined," said Jill Kozeny, a spokeswoman.
Hillary Rodham Clinton, Obama's choice as secretary of state, was sailing through her confirmation process with collegial questioning by the Senate Foreign Relations Committee.
She had faced an array of non-contentious questions Tuesday until two Republican committee members pressed her to take additional steps to ensure that former President Bill Clinton's global fundraising work did not pose even an appearance of conflict with her role as the chief U.S. diplomat. She balked, saying disclosure rules already agreed upon with Obama transition officials were carefully crafted and adequate to avoid any conflict.
She encountered no challenges to her basic vision for foreign policy. Clinton gave a polished performance, offering ready, well-prepared answers to questions on crises and trouble spots including the Israeli-Palestinian conflict, Iran, Cuba and Afghanistan. She offered few details about how she and Obama would handle those problems, except to say that in many cases they would offer a fresh approach after eight years of President George W. Bush.
Her confirmation as secretary of state is not in doubt, and she could be on the job as soon as Obama's first full day in office. The Senate Foreign Relations Committee planned to vote on the selection Thursday.