Geithner to face tough questions from left, right during hearing

Treasury Secretary Timothy Geithner is expected Wednesday to face
perhaps his toughest round of congressional questioning in his one-year
tenure from Republicans and Democrats alike.

The specific topic before the House Committee on Oversight and Government Reform is the taxpayer bailout of American International Group (AIG) and the role of the Federal Reserve. Geithner led the New York Fed before becoming Treasury secretary.

{mosads}But underlying all the bailout’s complexity is a simple and powerful brew. Republicans have targeted Geithner as Exhibit A in their attack on Democrats’ economic policies. And some liberal Democrats have started to go public with their deep and growing unease with the White House’s and Geithner’s efforts.

There are no signs that Geithner is on the way out.

The White House has repeatedly stated President Barack Obama’s confidence in the Treasury secretary, who has maintained that he recused himself during the AIG negotiations.

“Senator Reid feels that he is the best man for the job,” said Jim Manley, referring to Geithner.

Still, liberal pundits, including Arianna Huffington and Daily Kos founder Markos Moulitsas, have publicly campaigned against Geithner.

HuffingtonPost ran a headline in December that summed up concerns about his role in the AIG bailout: “HOW DOES GEITHNER SURVIVE THIS?”

Liberals critics have joined Rep. Darrell Issa (R-Calif.), the ranking member on Oversight, and at least seven other House and Senate Republicans seeking Geithner’s resignation.

Rep. Peter DeFazio (D-Ore.) in November publicly called on Geithner to step aside.

These liberals argue a new, more populist Treasury secretary would represent a dramatic and necessary change to show the country that the administration has shifted its economic policies. Some want that change to happen before Election Day.

Anxieties are high because of the midterm elections, particularly in the wake of Democrats losing the Massachusetts special election for the Senate seat held by the late Sen. Edward Kennedy. Liberals are concerned the White House has simply been too cozy with Wall Street and distant from Main Street.

The political dynamic is not unlike what the George W. Bush administration faced when it mulled firing Secretary of Defense Donald Rumsfeld. He held on to his job until a day after Republicans lost the House, leaving some GOPers wondering if they’d have been better off if Rumsfeld had been forced out earlier.

Geithner is not nearly the controversial figure Rumsfeld was, and has been in his post for less than a year.

Supporters argue he’s a success. Wall Street has rebounded in the wake of the government bailout and “stress tests” imposed by Geithner’s department.

The challenge for Geithner on Wednesday, some say, is to make his case as simply and powerfully as possible. And as frequently as possible.

“If he succeeds in doing that for 15 or 20, 25 percent of the hearing, that’s a success,” said former Rep. Gerry Sikorski.

While big banks have roared back to life a little more than a year after receiving massive government bailouts, the broader economy continues to suffer amid 10 percent unemployment and ongoing weakness in the housing market.

Ten members of the Congressional Black Caucus in December withheld their votes on a committee vote on a financial overhaul bill in part as a way to send a message to the White House that it needs to do more to help African-Americans make it through the tough economic times.

Those messages and sentiments will provide an unmistakable backdrop at the hearing on Wednesday.

Geithner will testify alone on the first panel. Then former Treasury Secretary Henry Paulson will testify. And a third panel will include current and former

Federal Reserve officials and Neil Barofsky, the special inspector general over the $700 billion bailout.

The Oversight panel’s investigation has centered on the $62 billion in payments to AIG’s financial partners in troubled derivatives contracts. The contracts were paid in full and the Fed did not negotiate a lower price with the major American and foreign banks that were AIG’s counterparties.

The House Oversight panel for the last year has been digging into the numerous government efforts to bail out the financial industry.

Panel Chairman Edolphus Towns (D-N.Y.) issued a wide-ranging subpoena for e-mails, phone logs and meeting notes from key Fed and Treasury officials, including Geithner.

That request resulted in a trove of 250,000 documents, some of which have been leaked over the past several days.

Issa’s office on Monday released a 22-page summary of the investigation that slams the Fed for a cover-up.

{mosads}“The 250,000 documents we received from the New York Fed paint a startling picture,” said Issa in a statement. “It is clear that the financial elites at the Federal Reserve felt it was more important to take care of wealthy Wall Street firms than to protect the taxpayer investments.”

Some committee staff said there was nothing in the documents that showed Geithner knew about or was involved in discussion about the level of disclosure of information related to the counterparties.

But lawmakers, including Towns, are expected to question Paulson and Geithner about why the government did not do more to pressure the counterparties to accept less than the full value of the derivatives.

Jennifer Swift contributed to this article.