After holding confirmation hearings for two days on the nomination of Federal Reserve Bank of New York president Timothy Geithner, the Senate Finance Committee today approved Geithner’s nomination as the next U.S. Treasury Secretary by a vote of 18 to 5, which will allow the full Senate to take up Geithner’s confirmation. During two days of hearings, Geithner faced questions regarding his views on the economic meltdown, the housing crisis, recovery efforts, the status of the U.S. dollar, and the controversy surrounding his failure to pay self-employment taxes while employed by the International Monetary Fund.
In his prepared testimony, Geithner stated that to meet the “extraordinary challenges” currently facing the country, aggressive action must be taken in four specific areas, including:
- adopting President Obama’s economic stimulus plan (the American Recovery and Reinvestment Plan), to support recovery and resuscitate the credit markets;
- making investments in the economy by expanding access to health care, moving towards energy independence and modernizing the country’s infrastructure;
- maintaining a sustainable fiscal position and “unwind[ing] the extraordinary interventions taken to stabilize the financial sector”; and
- undertaking comprehensive financial reform.
In their opening remarks, Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA) expressed concerns regarding the implementation of the Troubled Asset Relief Program (TARP) to date under Treasury Secretary Paulson. Furthermore, Chairman Baucus outlined the various responsibilities expected to be undertaken by the next Treasury Secretary, including ensuring that TARP spending is done wisely, cooperating with the Special Inspector General overseeing TARP, enforcing executive compensation restrictions, providing relief to homeowners and small businesses, overseeing the IRS and pushing efforts for international financial reform. Several members of the Senate Finance Committee also asked questions of Geithner, many of which he answered by submitting a 100-page document for the record containing his written responses, reiterating his oral testimony.
Geithner indicated that the President’s stimulus plan “is designed to provide a very substantial boost to growth in 2009 and 2010,” in the face of criticism with respect to the timelines for spending and tax relief outlays. In regard to the global financial crisis, Geithner emphasized that all U.S. trading partners must “provid[e] a fiscal stimulus” to their individual economies to prevent “exacerbating the downturn” worldwide. Geithner also specifically touched on the U.S.-China trade relationship, stating that “President Obama – backed by the conclusions of a broad range of economists – believes that China is manipulating its currency,” though the “immediate focus” with respect to this relationship “needs to be on the broader issue of stabilizing domestic demand in China and the U.S.” Stressing his commitment to strengthening U.S. competitiveness in the world economy, he further stated that a “strong dollar is in America’s national interest.”
Geithner also expressed his concern over the current state of regulation and supervision of financial institutions, and pledged that future investments of TARP funds in financial institutions would be subject to more stringent standards, including enhanced disclosure requirements and “increas[ing] lending above baseline levels.” Geithner acknowledged that the government has “not done enough to bolster new lending activity.”