Video: Tough questions for Geithner, Clinton

  1. Transcript of: Tough questions for Geithner, Clinton

    MATT LAUER, co-host: But now to Washington . Just six days to go before his inauguration , President-elect Obama and Vice President-elect Joe Biden will visit with the Supreme Court justices a little later today . But across the street at the Capitol , his Cabinet picks are hitting a few snags. Hillary Clinton grilled about potential conflicts of interest posed by her husband's foundation, while the nominee for Treasury secretary, the man who would oversee the IRS , is revealing mistakes on his personal tax returns . NBC 's Andrea Mitchell has more on this. Andrea , good morning to you.

    ANDREA MITCHELL reporting: Well, good morning, Matt. The transition team acknowledged an embarrassment for the brainy, new Treasury nominee, what the transition calls an honest mistake , not paying his payroll taxes when he worked for the IMF , an international organization that does not withhold taxes the way US companies do. Tim Geithner has now paid up, but it's at least a speed bump on an otherwise smooth road to confirmation . Tim Geithner came to the Senate Tuesday to explain how he failed to pay more than $34,000 in taxes between 2001 and 2004 . Finance Committee chairman Max Baucus said Geithner corrected the errors as soon as they were brought to his attention.

    Senator MAX BAUCUS (Democrat, Montana): The errors were in my judgment honest mistakes. Not in any way intentionally make those mistakes. The country needs a Treasury secretary quickly.

    MITCHELL: According to the Obama transition team, Geithner paid his income taxes but quote, "made a common mistake on his tax returns with regard to self-employment taxes that he owed on income earned while working at the IMF . Aides say he thought the IMF was withholding the money , but it wasn't. With the economy on the line, both Democrats and Republicans say this will not derail Geithner 's nomination.

    Offscreen Voice: Is this a big problem, senator?

    Senator ORRIN HATCH: I support him. I have no comment on it.

    MITCHELL: At her confirmation hearing, Hillary Clinton displayed a mastery of foreign policy and what she calls smart power.

    Senator HILLARY CLINTON: I assure you that if I am confirmed, the State Department will be firing on all cylinders to provide forward thinking , sustained diplomacy in every part of the world.

    MITCHELL: That renewed diplomacy will include reaching out to Iran .

    Sen. CLINTON: We are not taking any option off the table at all. But we will pursue a new, perhaps different approach that will become a cornerstone of what the Obama administration believes is an attitude toward engagement that might bear fruit.

    MITCHELL: The only controversy over possible conflicts of interest with foreign donors to her husband's charities.

    Senator RICHARD LUGAR (Republican, Foreign Relations Committee): The bottom line is that even well-intentioned foreign donations carry risk for United States foreign policy . This was bound to be a dilemma from the moment that the president- elect asked you to become secretary of state.

    Sen. CLINTON: I hasten to say that my career in public service is hardly free of conflict, Senator, so I have no illusions about the fact that no matter what we do, there will be those who will raise conflicts.

    MITCHELL: Now, no one questioned Bill Clinton 's good works, only the possibility of undo foreign influence on his wife. Clinton says that she and her husband are already doing more than the ethics rules or the law require and support for her confirmation is so overwhelming that her Senate colleagues are holding a farewell party for her today. Matt :

updated 1/15/2009 10:35:07 AM ET 2009-01-15T15:35:07

Revelations that Timothy Geithner failed to pay some of his taxes have derailed Democrats' efforts to install him quickly as President-elect Barack Obama's treasury secretary, but senators in both parties say his tax problems won't torpedo his chances for confirmation.

Obama said Wednesday that the disclosures that Geithner had failed to pay $34,000 in taxes between 2001 and 2004 were embarrassing, but added that Geithner's "innocent mistake" shouldn't keep him from taking the helm of the new administration's urgent efforts to revive the economy. Several Republicans agreed that Geithner would get Senate approval and said their party had little appetite for a partisan fight at a precarious time for the economy.

GOP opponents of Geithner should "think this through," said Sen. Orrin G. Hatch, R-Utah., a member of the Senate Finance Committee that's considering his nomination. "They're not going to get anybody better than him from this administration for treasury secretary."

Still, Senate Republicans, who have been mostly deferential to Obama's nominees, are blocking Democrats' efforts to fast-track Geithner's nomination through the committee, with at least one panel member saying his tax problems deserved greater scrutiny.

Sen. Jim Bunning, R-Ky., another Finance Committee member, "did not feel it was appropriate to rush forward with the hearing this week in light of the late-breaking information," his spokesman, Mike Reynard, said. "He wanted more time to carefully consider" the disclosures. Sen. Jon Kyl of Arizona, the No. 2 Senate Republican, also was objecting, aides said.

Obama had hoped for approval by Tuesday, but given the GOP objections, senators scheduled Geithner's confirmation hearing for next Wednesday, with Senate debate and a vote sometime after that.

Video: Obama: Embarrassing moment for Geithner "Is this an embarrassment for him? Yes. He said so himself. But it was an innocent mistake," Obama said. "My expectation is that Tim Geithner will be confirmed."

In the meantime, Stuart Levey, the Treasury Department's undersecretary for terrorism and financial intelligence, has agreed to stay on until the Senate confirms a replacement for Treasury Secretary Henry Paulson, according to a government official with knowledge of the situation but unauthorized to speak publicly.

Democrats and Republicans on the Senate Finance Committee are backing Geithner, who's engaged in an intense damage control effort, including numerous phone calls to senators, to persuade them that his tax problems were the result of innocent errors, not deliberate attempts to avoid paying the Internal Revenue Service.

"It's an honest mistake," said Sen. Max Baucus, the Montana Democrat who chairs the committee, adding that Geithner's confirmation was "a given."

Video: Kerry: Geithner made ‘honest mistake’ GOP Sen. Lindsey Graham of South Carolina was among those coming to Geithner's defense.

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"These are huge times. Now is not the time to think in small political terms," Graham said. "I don't see any desire by the Republican Party to play gotcha on this. ... I think he's the right guy."

Iowa Sen. Charles Grassley, the senior Finance Committee Republican, said Geithner's tax troubles were "disconcerting" given that the New York Federal Reserve president was auditioning for a post in which his considerable powers would include control of the IRS, but not necessarily "disqualifying."

The flap all but guarantees that Geithner's confirmation hearing will feature a grilling about his tax errors.

He 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 Finance Committee on Tuesday.

He paid some of the taxes in 2006, after an IRS audit discovered the discrepancy for taxes paid in 2003 and 2004. But it wasn't 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 final two years there.

Despite the disclosures, several committee Republicans appeared to be leaning toward backing Geithner. Hatch called the tax problems "a mistake that a human being can make."

Sen. John Ensign, R-Nev., said he didn't foresee trouble for the nominee, and Sen. Pat Roberts, R-Kan., said he'd probably vote to confirm Geithner.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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