Geithner: A Devil's Bargain

January 15, 2009

By Bill Singer

An anonymous reader (Ednomore) of my last blog entry: Geithner and Mathis: Troubling Double Standard , wrote to me the following:

Bill, You make very good points. I would like to make only one point about the possible treasury secretary. I think the fact that he did not know or ignored current tax law by not paying taxes due may indicate that he may not be qualified to head up the treasury department which includes the IRS. I would speculate that he did know the law because he ignored earlier failure to pay taxes after being audited on 2006 taxes. He obviously knew or should have known that he did not pay taxes due in those earlier years.

My reply back to him follows:


I want to be very clear up front -- I have absolutely no dispute with anything you say; in fact, we are basically in agreement.

Now, for some of the nuance. I am willing to give Geithner the benefit of the doubt about the non-payment of his self-employment taxes while at IMF but only up to 2006 when the IRS audit put him on actual notice of the non-payment issue. We both agree on that bright line. Virtually everyone I know of has had some IRS issue -- be it lost filing, late filing, underpayment, missed payment, disputed payment, mistaken deduction, etc. All of which may explain why I am in favor of a flat tax.

Okay, so, in 2006 Geithner realizes there was an omission on his part and he pays the 2003 and 2004 taxes cited by the IRS. What troubles me at that point is 1. why the IRS apparently didn't bother to look at all tax returns relevant to Geithner's employment at IMF (including the 2001 and 2002); 2. why Geithner didn't have the apparent commonsense to voluntarily pay the owed 2001 and 2002 taxes in 2006; 3. whether Geithner was reimbursed by the IMF for self-employment taxes from 2001 through 2004 and if he merely pocketed those payments; and 4. why it took until Obama's vetting team allegedly uncovered the unpaid 2001 and 2002 taxes for Geithner to write the checks. Again, I think we both concur on the above concerns.

You are on the mark when you question the propriety of Geithner's oversight at Treasury of the IRS. While I wish I could fabricate some convincing argument on his behalf, I cannot and will not try. Similarly, the reason I raised the Mathis issue is because it clearly supports your concerns and notes that under somewhat similar circumstances of the non-payment of taxes over a period of years (and the subsequent payment of the disputed taxes), some folks get fined and lose their careers whereas others get nominated to Treasury Secretary.

Ultimately, these are the difficult and thorny challenges of our day. While I suspect that Joe Kennedy was not pure as the driven snow when he was appointed by FDR to set up the nascent Securities and Exchange Commission and become its first Chair, nonetheless, he got the task assigned done and with remarkable results. Similarly, for all his prickly quirks and insubordination, what general would you have sent to rescue Bastogne but Patton?

The world is not always run by angels and saints. The former live in Heaven and the latter are often martyred. Worse, sometimes angels fall from heaven and become devils. In this day and age I fear that we must place more weight on competency and less weight on purity of heart and soul. There may well be some folks who I would not let use the towels in my bathroom but I would welcome them into government if they can clean this mess up and set us back on a righted course. It is the consummate devil's bargain -- but that I wish it were otherwise.

Tim Geithner has fallen in my esteem but I see no one else more qualified for the job.

Bill Singer