Panel clears Geithner for full U.S. Senate vote

WASHINGTON (Reuters) - President Barack Obama's pick to head the U.S. Treasury, Timothy Geithner, won Senate Finance Committee backing on Thursday, putting him a key step closer to starting a job directing the new administration's efforts to stabilise the economy.

With an 18-5 vote, the panel largely overlooked Geithner's underpayment of $34,000 (24,500 pounds) in taxes and cleared the way for a full-Senate confirmation vote, although Republicans could delay that until next week.

Finance Committee Chairman Max Baucus, a Montana Democrat who has been shepherding Geithner's nomination, said he wanted to hold a Senate floor vote as early as Thursday.

"The president needs his team. I'm trying to help him get his team in place," Baucus told reporters after the vote.

But Jim Manley, a spokesman for Senate Majority Leader Harry Reid, said: "If Republicans object, we might not be able to vote to confirm until next week."

Obama's top economic cabinet member needs full confirmation to start work tackling a financial crisis that is threatening to worsen a yearlong recession as job losses mount.

Geithner told the committee on Wednesday that the Obama administration in coming weeks will unveil a multi-pronged

effort to stabilise the housing market, strengthen core banks and support consumer credit to help foster economic recovery.

Sen. Charles Grassley, the panel's ranking Republican, who voted against Geithner, said he would not try to delay a floor vote, adding that the confirmation "ought to be decided soon."

Worries over potential delays in Obama's economic stimulus efforts have helped pushed stocks lower in recent days as mounting corporate job cuts and weak housing data feed worries about a worsening economy.

Comments from White House spokesman Robert Gibbs that the new president was working to ensure that stimulus and financial stability plans are "implemented quickly" helped limit some losses, but major stock indices still lost more than 1 percent on Thursday.

Gibbs added that Obama was pleased with the committee's "strong, bipartisan" vote.

Geithner, who currently heads the New York Federal Reserve Bank, was considered by many to be an ideal candidate for the job because he has already been deeply involved in government efforts to prop up financial institutions and markets amid the worst financial crisis since the 1930s.

"In the current grave economic circumstances, America's next treasury secretary will not have the luxury of being simply an expert or simply a leader," Baucus said before the vote. "Tim Geithner will need to be both."

TAX PROBLEMS COST VOTES

Geithner's nomination appeared without controversy until revelations last week that he underpaid self-employment tax for several years when he worked for the International Monetary Fund earlier in this decade.

Although Geithner corrected what he called "careless" and "unintentional" mistakes, the tax errors cost him some votes on the committee.

"I don't believe that the requisite candour exists for me to indicate my support for him with an affirmative vote," Republican Sen. Jon Kyl of Arizona said.

Democrats and some Republicans on the panel said the U.S. economy's situation was too dire to leave the top Treasury post vacant any longer and Geithner was well-qualified for the job.

Geithner answered dozens more written questions from senators in a 102-page document released on Thursday, reaffirming the Treasury's long-standing currency mantra.

"A strong dollar is in America's national interest," he wrote in the document.

OBAMA SEES YUAN MANIPULATION

Geithner also issued a stern warning to China, which has a huge trade surplus with the United States, saying that Obama believes Beijing was manipulating its yuan currency.

"President Obama -- backed by the conclusions of a broad range of economists -- believes that China is manipulating its currency," Geithner wrote. "President Obama has pledged as president to use aggressively all the diplomatic avenues open to him to seek change in China's currency practices."

However, Geithner said due to the global economic crisis, the immediate focus of U.S.-China relations "needs to be on the broader issue of stabilizing domestic demand in China and the

U.S."

Geithner also said the Treasury had no current plans to request more bailout money beyond the existing $700 billion already authorized, but said the situation was "dynamic."

"We have to be prepared to act flexibly and with speed if conditions worsen appreciably, to devote more resources if that is necessary to secure our objectives, and we have to make it clear that we will continue to act until we have restored the strength and vitality of the U.S. financial system," he wrote.

(Additional reporting by Jeremy Pelofsky, Rick Cowan, Tim Ahmann, Mark Felsenthal, Doug Palmer and Emily Kaiser; Editing by Dan Grebler)