"Treasury Nominee Geithner Faces Senate Panel"

STEVE INSKEEP, Host:

Back in the U.S., the Senate Finance Committee is holding a confirmation hearing this morning for Timothy Geithner. He's President Obama's nominee for Treasury secretary. The hearing was delayed because of taxes that Geithner didn't pay years ago. To talk about what else might come up in today's hearing, we've called David Wessel. He's economics editor of the Wall Street Journal and a regular guest on this program. David, good morning.

DAVID WESSEL: Good morning, Steve.

INSKEEP: I want to ask about something that could easily be more controversial than Geithner's taxes. He was president of the New York Federal Reserve Bank, which means he's been in the middle of this financial bailout, which has been much criticized.

WESSEL: That's right. And so his challenge this morning is to defend what he has done and what the Fed has done, including saving Bear Stearns, the big investment bank, and letting another big investment bank, Lehman Brothers, collapse, while trying to re-brand, if you will, the bank bailout that he and Fed Chairman Bernanke and Treasury Secretary Paulson engineered at a time when it doesn't seem to be working very well. So I suspect he'll defend what they did, but suggest a new direction going forward, particularly on the banks.

INSKEEP: I think it was just a few weeks ago, late last year, that Paulson, on our air, said, hey, we've stabilized the banking system. And here we have this plunge in the Dow just yesterday because of worries that the banking system is not stabilized. Is Geithner going to give any clues as to what the new administration is going to do about that?

WESSEL: Well, if he's asked about it, and I suspect the senators will ask about it, he will probably outline the principles that they're going to follow in rethinking what to do about the banks. The banks are in worse shape than had been anticipated. There's a lot of talk about putting more government money into the banks. One of his challenges is to say that the government will do whatever necessary to protect the financial system without scaring away anybody who might be thinking of investing in banks for fear of being wiped out.

INSKEEP: Oh, I suppose if you're talking about nationalizing banks, people might run from them.

WESSEL: Exactly. Not depositors, of course, but potential investors.

INSKEEP: Wow. Now, is Geithner going to try to deliver a message about spending and tax cuts and let's dare - do we even dare mention the deficit today?

WESSEL: He certainly will make a point, I predict, that it's important for Congress to move swiftly on President Obama's stimulus package of spending increases and tax cuts, pointing to how weak the economy is and how urgent it is to get on with this. And he will - as both the president has and Larry Summers, his economic adviser, have emphasized that while we're spending a lot of money now and cutting a lot of taxes now, we do have to prepare for going in the opposite direction to assure people that in the long run, the U.S. government can deal with its deficit. So that's another one of these balancing acts he's going to have to do today.

INSKEEP: OK. So, huge issues will have to be addressed here. But also, no doubt, questions about Mr. Geithner's taxes. What does he say?

WESSEL: It'll be interesting to see whether they bring that up or not, as there's been a lot of attention to the fact that he didn't pay all the taxes he was supposed to when he was working for the International Monetary Fund. The one thing that seems clear, though, is that this is not going to derail his nomination. Even Republican senators who have been a little critical of his behavior on taxes seem to think that, as one Washington Post columnist put it, this nomination is too big to fail.

(SOUNDBITE OF LAUGHTER)

INSKEEP: In other words, the issues are too huge here to go into his past and go after every little thing, that's what you're saying.

WESSEL: I think that they're going to try and score political points, but in the end it seems like such an urgent situation to have a Treasury secretary in place that it looks like they will, you know, beat him up a little bit and then approve him so that he can get to work trying to save this financial system from collapse.

INSKEEP: David, always good to talk with you.

WESSEL: A pleasure.

INSKEEP: David Wessel is economics editor of the Wall Street Journal.