Timothy Geithner

Commentary by Kathy Lien, GFT Analyst

Uncertainty about the future of President-elect Barack Obama’s cabinet and staff are mounting. We are now met with controversy over one of the most crucial positions, Treasury Secretary. It was recently reported that the nominee for the position, Timothy Geithner, failed to pay a large portion of his taxes, casting doubt upon the certainty for his seemingly inevitable nomination. These indiscretions involved ,000 of unpaid social security and Medicare payments. One senator iterates the irony of having a tax-delinquent Treasury Secretary who has responsibilities for the tax policies of the IRS. In response to these developments, Geithner’s confirmation hearing has been postponed until the day after Obama’s inauguration. The strength of Obama’s proposed “Dream Team” of staff and advisors is beginning to show some weakness. The Geithner news follows Bill Richardson’s withdrawal as Commerce Secretary, Ray LaHood’s possible withdrawal as Secretary of Transportation, and scandals with the Attorney General nominee Eric Holder. In the event that Geithner is stripped from his nomination, it is likely that Stuart Levey, the Treasury’s Undersecretary for Terrorism and Financial Intelligence will take the position.

Geithner Possesses “Unique Qualifications”

Despite the very embarrassing and hypocritical nature of Geithner’s problems, there is very little speculation surrounding the possibility of his confirmation. Stuart Levey, the stand-in until someone is officially appointed, lacks one major quality that makes Geithner a perfect choice, the ability to satisfy bipartisan requirements. In fact, Geithner’s status as an independent policy maker is most likely the reason why he will be confirmed as Treasury Secretary. Combined will his experience in dealing with the financial crisis, he is still the undeniable choice. The urgent economic challenges ahead may be enough by itself to overshadow his tax problems. Senator Lindsey Graham mentions that, “These are not the times to think in small political terms.” A decision to remove him as nominee would serve as a destabilizing factor for the financial markets, something that the Obama administration will prevent from doing at all costs. Since no better candidate exists, if he is not confirmed, uncertainty about who will be the next Treasury Secretary could hurt the US dollar. Although his experience with domestic tax policy will be directly targeted, many policymakers are still convinced that he has “unique qualifications” that makes certain discrepancies worth overlooking.

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