Art Cashin, one of the talking heads on CNBC, said early on Thursday morning that the stock market was going down in part because of a lack of confidence caused by the failure of the Senate to quickly confirm Timothy Geithner as Treasury Secretary. This was the party line of the Wall Street insiders who have a special interest in getting Geithner confirmed. Later on that day, Geithner was endorsed 18-5 by the Senate Finance Committee. A full Senate vote on the nomination may be held on Monday.
The American people can’t be blamed for thinking that if a tax cheat inspires confidence on Wall Street and can get an overwhelmingly positive vote in a Senate committee, the nation must indeed be headed for financial ruin.
But Geithner not only got caught cheating on his taxes, he is now being accused of lying about his cheating during his confirmation hearing when he attempted to blame the problem on his TurboTax computer software program.
But don’t expect this to be a major issue for business cable network CNBC.
In a major conflict of interest media scandal, General Electric’s media properties, which include CNBC, NBC News and MSNBC, are indirectly benefitting from the Wall Street bailout through a federal loan guarantee of $139 billion extended to GE Capital, the lending arm of GE.
What’s more, GE chairman Jeffrey Immelt is a member of the board of the New York Federal Reserve, headed by one Timothy Geithner. In fact, Immelt may be involved in finding a successor to Geithner as president of the New York Federal Reserve Bank.
When GE Capital got its federal loan guarantee, the story was covered on CNBC by reporter Steve Liesman. A transcript includes the obligatory notation that “GE is the parent company of CNBC” but the video of Liesman breaking the story didn’t mention that.
The mantra, “GE is the parent company of CNBC,” is supposed to protect GE’s media property from any charges of conflict of interest in its coverage of the financial meltdown.
One of CNBC’s most famous and outspoken talking heads, Jim Cramer, did an amazing turnaround, first opposing Geithner and then supporting him. “I’ve given up fighting this,” he blurted out. “Obama loves him.” Cramer said that “the guy got a free pass” and “everybody on Wall Street―all my buddies who lost billions for you, for the American people, told me, ‘Jim, he’s the greatest.’”
“Well, now, everybody has discovered the truth,” he added, alluding to the tax cheating. Cramer said that if he had committed similar offenses, he would be going to jail.
On Capitol Hill, some senators were listening to their constituents, thousands of whom were phoning in protest over the Geithner pick, rather than to CNBC.
“I cannot vote to confirm the nomination based on the record and the need to foster greater accountability in both big government and our financial institutions,” declared Senator Charles Grassley, the top Republican on the committee, in making a point that should have been obvious to other members. He quoted a constituent as saying, “If the man cannot handle his own finances, how is he going to handle the country’s?”
Nevertheless, only four members joined with Grassley in voting against Geithner. They were Senators Jon Kyl of Arizona, Jim Bunning of Kentucky, Pat Roberts of Kansas, and Michael B. Enzi of Wyoming.
“I cannot even believe we are voting on this nomination today,” is how Enzi described the situation. He couldn’t believe a person with tax problems like Geithner could even be considered for the position.
Enzi, the Senate’s only accountant, announced his opposition to Geithner by asking, “How do I explain to my constituents that I voted to confirm someone who will make them pay taxes, but sometimes does not pay his own taxes?”
Enzi called Geithner’s handling of his taxes “negligent behavior” that “deserves more than a simple slap on the wrist or half-hearted apology before a Senate committee.” He explained, “In previous years, nominees for positions that do not oversee tax reporting and collection have been forced to withdraw their nomination” because of similar issues.
All 13 Democrats on the committee voted for him. Five Republicans―Hatch, Snowe, Crapo, Ensign and Cornyn―did so as well.
Senator John Ensign, chairman of the Senate Republican Policy Committee, which is composed of GOP Senate leaders and the chairmen of the Senate’s standing committees, voted for Geithner despite being quoted by the BBC as saying that his switchboard had lit up with calls from constituents asking how someone who’d failed to pay their taxes could be put in charge of the IRS.
Republican Senator Orrin Hatch, once considered a conservative, said he would vote for Geithner because his tax cheating was nothing more than a series of “honest mistakes.”
The Hatch rationale for confirming Geithner reflected the influence of what Politico.com reported was a document of “talking points” originally prepared by the Obama transition office and “distributed to Capitol Hill, K Street and congressional reporters.” The “talking points” were designed to portray Geithner’s problems as “simple mistakes or oversights.”
In his confirmation hearing, however, Geithner dug a deeper hole by falsely suggesting that some of his tax dodging may have stemmed from use of the TurboTax computer software program that helps an individual file his tax returns.
While insisting that “these are my responsibilities, not the tax software’s responsibilities,” he was specifically asked by Grassley, “Did the software prompt you to report income and pay self-employment taxes on your IMF income?” He answered, “Not to my recollection, Senator.”
CNBC reported that shares of TurboTax-maker Intuit “fell to their low on the day on strong volume” after Geithner’s claims but did not include a rebuttal from TurboTax. But officials of the company flatly denied the allegation that their software could or should be blamed for his failure to pay taxes.
Dan Maurer, senior vice president and general manager of TurboTax, issued a statement saying that “Each year, millions of Americans use TurboTax to accurately prepare and file their federal and state tax returns. The software helps taxpayers report their income and find the deductions and credits they’re entitled to claim. TurboTax, and all software and in-person tax preparation services, base their calculations on the information users provide when completing their returns. TurboTax also has built-in error-checking tools that routinely catch common taxpayer mistakes.”
The headline, “Treasury Pick Misfiled Using Off-the-Shelf Tax Software,” over a story by business reporter Frank Ahrens of the Washington Post, suggested that the software was to blame. But inside the article Ahrens quoted an official of an international agency who handles these matters and understands the software as saying that TurboTax sends up a “red flag” in order to catch the “mistakes” that Geithner claims he made.