Geithner Faces Questions On Housekeeper, Taxes

Treasury Secretary nominee Timothy Geithner is facing questions over the immigration status of a former housekeeper and whether he paid Social Security and Medicare taxes.

Sen. Charles E. Grassley, the ranking Republican on the Senate Finance Committee, has raised questions about both issues, the Wall Street Journal reported, though Senate Democrats told CNBC that they don't think this will derail the nomination. Geithner's confirmation hearing is scheduled for Thursday.

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According to the Journal, the former housekeeper's immigration papers expired while working for Geithner, though she later received a green card and became legal. The second question involved employment taxes while Geitner was working for the International Monetary Fund from 2001 to 2004.

• Click Here to See Geithner's Tax Documents

Senate Finance Committee Chairman Max Baucus (D-Mont.) has summoned committee members to his office this afternoon to discuss the matter.

Geithner informed the Senate panel that he had made a common tax mistake while working for the IMF, an official with the Obama transition team told Reuters. The official said the error stemmed from an unusual payroll system that U.S. employees of the IMF and other international organizations must use.

"This unusual payroll system commonly creates confusion among U.S. employees,'' the official said. Geithner realized the error in November during the review process for his nomination and immediately corrected it, the official added.

"All of his taxes have now been paid in full, and at no time was there any intention on Mr.Geithner's part to avoid taxes,'' the official said.

Video: Sen. Max Baucus (D-MT) discusses Timothy Geithner's housekeeper issues.

Geithner's nomination to replace Henry Paulson as Treasury secretary has been widely praised in Washington and on Wall Street.

"Geithner is a solid choice. He has shown more independent thinking," said Former Sen. Don Riegle, who chaired the Senate Banking Committee during the savings and loan crisis. "He has also seen this financial system meltdown from the inside ... he can offer highly skilled and pragmatic advice to Obama."

Geithner's task will be enormous, however. The US is facing a worsening economy, prolonged credit and housing crises as well as rising unemployment. Geithner, however, has been closely involved in federal efforts to deal with the financial crisis, having worked with Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke

Some, however, think that Geithner might be too closely linked to the highly criticized management of the $700 Wall Street bailout fund, known as the Troubled Asset Relief Program, or TARP.

"There's a little bit of a question because he's associated with the bailout," said James Awad, managing director of Zephyr Capital. "And that's still a work in progress and not totally successful. There will be a few who'll be upset because he's associated with the TARP."

Still, "I would think the market is going to like it," Awad added. "People will view it as a safe choice, an experienced guy."

According to the New York Fed Web site, Geithner graduated from Dartmouth with a bachelor’s degree in government and Asian studies in 1983 and from the Johns Hopkins School of Advanced International Studies with a master’s in International Economics and East Asian Studies in 1985.

He joined the Treasury in 1988 and worked in three administrations, serving as Under Secretary of the Treasury for International Affairs from 1999 to 2001 under Rubin and Summers.

He become New York Fed president in 2003. In that capacity, he worked as the vice chairman and a permanent member of the Federal Open Market Committee, the group responsible for formulating the nation's monetary policy.

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