WASHINGTON, Jan. 21 (UPI) -- U.S. Treasury Secretary-designate Timothy Geithner said Wednesday last year's bailouts of financial institutions were needed to avoid catastrophe.
Responding to questioning from Sen. Olympia Snowe, R-Maine, during confirmation hearings before the Senate Finance Committee, Geithner defended his role in unpopular decisions by outgoing Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Benanke last year to use taxpayer funds to help prop up faltering investment banks.
"I think that was the right decision at the time," Geithner said. "I think if that had not been done at that time, I think we would be facing, really, a catastrophic failure in our financial system."
The moves have since been criticized as ineffective and reflective of a focus on helping institutions rather than homeowners. As the current president of the Federal Reserve Bank of New York, Geithner was a key adviser in the earlier moves.
But he admitted Wednesday the moves were hampered because of the their "ad hoc" nature, saying the financial system was still "under substantial stress" and recovery efforts in the future need to be "fundamentally reformed."
"Many people believe the program has allowed too much upside for financial institutions while doing too little for small business owners, families who are struggling to keep their jobs and make ends meet, and innocent homeowners," Geithner said. "We have to fundamentally reform this program to ensure that there is enough credit available to support recovery."
Geithner also apologized for failure to pay $34,000 in Social Security and Medicare self-employment taxes from 2001 to 2003, telling committee members that while he made "careless and avoidable" mistakes in preparing his taxes, they were "completely unintentional."
"It would seem that minor due diligence on your part might have prevented" the tax problem, Sen. Charles Grassley, R-Iowa, said.