Can Obama Save Geithner?

Barack Obama picked Timothy Geithner to save the U.S. economy.

But now, Obama has to save Geithner first.

Geithner’s tax problems surfaced publicly Tuesday – but Obama’s team has known about them for at least six weeks, waging a behind-the-scenes campaign to push him through the Senate Finance Committee, despite the blemishes on his record, according to documents from the committee.

The episode raises questions about whether Geithner’s nomination will survive, despite early soundings of support from Democrats, and perhaps, more importantly, a larger question:

What was Obama thinking?

Obama's choice of Geithner flirts with an issue that has deep-sixed Cabinet picks before –his former housekeeper’s immigration status lapsed briefly while she was in his employ.

Also, Obama’s choice to oversee the IRS flubbed his own tax returns – some of which he had personally prepared – to the tune of $42,700 in back taxes and penalties.

And Geithner decided to pay more than half that amount — $26,000 — only after Obama decided to nominate him, according to finance committee documents.

Obama’s team calls them “honest mistakes.” And in the end, Geithner had the only supporter that mattered – Obama himself. One source familiar with Geithner’s vetting says Obama knew about Geithner’s tax problems and decided to push ahead with the nomination anyway because he “still wanted him."

"At the end of the day, Barack decided that he was the best person for a really important job," the source said.

"It wasn't that it wasn't a big deal," the source said. "It was definitely factored in. The question was 'Does this disqualify him?' And the answer was no. It was something that he took care of. Yes, it was a mistake but it was in the past."

"It was put into calculation and at the end of the calculation, he was still the best person for the job."

So far anyway, some Senate Democrats, and a few key Republicans, agree. Finance Committee Chairman Max Baucus (D-Mont.) said the revelations did not disqualify Geithner, and he said it was crucial for Obama to have a new Treasury secretary in place when he takes office next week. Sen. Orrin G. Hatch (R-Utah) said he still supports Geithner.

Iowa Sen. Charles Grassley (R-Iowa), the ranking member on the Finance Committee, has privately questioned whether Geithner’s problems should derail his nomination and so far has refused to comment publicly.

It’s not clear when – or if – Obama’s team planned to go public with the tax problems, first disclosed by the Wall Street Journal Tuesday. And the Geithner developments come less than two weeks after another Obama Cabinet pick, Bill Richardson for commerce secretary, washed out amid questions about what Obama’s vetters knew about a grand jury investigation into the New Mexico governor’s office.

Obama chose Geithner on Nov. 24 – and at the time, the pick was viewed as a forceful move by Obama to assert himself on the economic front. It came after a particularly bad week in the economy, at a time when commentators were starting to raise questions about whether the new president was taking a firm enough stand to reassure the public about the economic meltdown.

Perhaps the biggest factor in Geithner’s favor now is that he’s well-known to senators on both side of the aisle, who consider him a smart and level-headed figure from his work on the Wall Street bailout as president of the New York Fed. It would be a particularly bad time to deny Obama his choice for treasury, when world markets are looking to the new administration to get the U.S. economy on stronger footing.

Still, one potential trouble sign for Geithner is that some senators are speaking out against giving Obama the second half of that $700 billion bailout – which wa deeply unpopular among many in the public. If some of that public sentiment spills over onto the Geithner nomination, that could spell trouble. For instance, CNN’s Lou Dobbs already was complaining about the Geithner choice because of his role as an architect of the bailout.

In the end, presidents usually get wide leeway to build the teams they want, and many senators seems satisfied with Obama’s explanation that these tax and immigration issues were honest slip-ups.

The Senate Finance Committee documents, however, suggest committee staff put Geithner through the paces – and questioned some of his answers. Transition aides met with committee staff on Dec. 5 to explain Geithner’s back taxes and the committee did follow-up interviews with three Geithner accountants and a human resources rep at his former employer, the International Monetary Fund. Geithner also met personally with committee staff Dec. 19.

The committee notes that Geithner failed to pay his Social Security taxes while employed at IMF from 2001 to 2003 – even though he was provided documents that explained that he was required to do so.

In addition, Geithner included payments to overnight camps in calculating his dependent child care credit in 2001, 2004 and 2005. His accountant informed him in 2006 the camps were not allowable expenses. The committee notes that Geithner did not file amended returns to fix the mistake.

Despite that, the source familiar with Geithner's vetting made clear the treasury pick still has Obama's blessing.

"Definitely," the source said. "He stays."