Dems Scramble Following Geithner Report

Democratic senators have gathered in an emergency meeting discussing the fate of Treasury nominee Timothy Geithner, who is under scrutiny after a report that he did not pay payroll taxes for his housekeeper.

Sen. Charles Grassley has raised questions about the immigration status the housekeeper, and also questioning why Geithner did not pay Social Security and Medicare taxes, The Wall Street Journal first reported this afternoon.

Two issues have emerged for Geithner in his confirmation: First, while working for the International Monetary Fund in the early 2000s, Geithner failed to fully pay his withholding taxes. Second, an immigrant who was working for Geithner during 2004-05 had her work authorization expire before she left Geithner's employment.

Geithner was audited in 2006, and it was revealed that he had not paid all his withholding taxes while working at the IMF during 2003-04. Obama transition officials blame the IMF for that issue. Geithner then paid those back taxes plus interest.

But as Geithner was being vetted for the Treasury post, Obama transition officials also realized that he had also failed to pay all his withholding taxes for his housekeeper from 2001-02. Although he was not legally required to, Geithner paid those back taxes as well, according to a transition official.

Allegations about illegal immigrant domestic staff and failure to pay payroll taxes have killed cabinet nominations in the past, so the Obama transition team has quickly gone into damage control, releasing this statement:

“This afternoon, upon his own request, Mr. Geithner met with bipartisan members of the Senate Finance Committee,” said an Obama aide familiar with the situation. “He felt it was important that the committee hear directly from him on these issues. He made several critical points about the common tax mistake made while he worked at the IMF; and the expiration of a housekeeper’s employment authorization for the last three months of her employment.”

While most senators declined to comment on the Geithner situation, Sen. Debbie Stabenow (D-Mich.), said: “What we talked about had been fully disclosed to transition officials. I am certainly going to support him.”

Sen. Orrin Hatch (R-Utah) said he "still supports" Geithner.

The Obama transition team is clearly concerned, though, about their star nominee to oversee Treasury and the economic policy in general. They are monitoring the reports and are involved in the closed door meetings.

Regarding his housekeeper’s immigration status, Geithner says he was unaware that her work permit had expired.

“Mr. Geithner was unaware that three months before she stopped working for them to have a baby, her authorization expired,” the Obama aide said. “Nevertheless, she continued to reside legally in the United States, she was married to a U.S. citizen, and she was granted a green card a few months later.”