Congressman Wants to know if Geithner's Gaffe on Dollar was Intentional -- or a 'Stupid' Blunder

March 26, 2009 - 8:48 PM
Why did the Treasury Secretary tell Congress under oath Tuesday that he wouldn't consider China's proposal to abandon the U.S. dollar as the world currency -- then say the following day that the U.S. would "be open" to the idea?

Treasury Secretary Timothy Geithner (left) and Federal Reserve Chairman Ben Bernanke testify before the House Financial Services Committee on Tuesday, March 24, 2009. (AP Photo/Evan Vucci)

(CNSNews.com) – An Arizona congressman wants to know why Treasury Secretary Timothy Geithner isn’t facing tough questions after an apparent about-face on whether the U.S. would consider China’s request to abandon the dollar as the global currency.

Geithner told Congress under oath Tuesday that he would not consider China’s proposal to shift away from the U.S. dollar toward a mixed world currency -- then the following day (Wednesday) said the U.S. would “be open” to the idea.
 
 “Really, Mr. Secretary?” Rep. John Shadegg (R-Ariz.) queried. “Is it too much to ask that your position remain unchanged over a 24-hour period?”
 
The pledge to not move away from the dollar came during his appearance before the House Financial Services Committee on March 24, where the Treasury Secretary told Rep. Michele Bachmann (R-Minn.) that he would “categorically renounce” recent proposals from China and others to shift away from the dollar as the world’s reserve currency:  
 
Rep. Michele Bachmann (R-Minn.): We’ve seen both China, Russia, and Kazakhstan, make calls for an international monetary conversion to an international monetary standard as soon as the G20, and I’m wondering would you categorically renounce the United States moving away from the dollar and going to a global currency as suggested this morning by China and also by Russia, Mr. Secretary?
 
Treasury Secretary Timothy Geithner: I would, yes.
 
However, on March 25, at an appearance in New York at the Council on Foreign Relations, Geithner was asked if he was considering the proposal that People’s Bank of China Governor Zhou Xiaochuan made in advance of an upcoming G20 summit to use a mix of  currencies as the global standard. 
 
Geithner said in response: “As I understand his proposal, it’s a proposal designed to increase the use of the IMF’s (International Monetary Fund’s) special drawing rights. And we’re actually quite open to that suggestion.”
 
Those “special drawing rights” would constitute the new global reserve currency, Shadegg said, prompting what the congressman called “the $64,000 question” -- Was Geithner being disingenuous?
 
“Is he intentionally dissembling here, or is he just lost and is so much in over his head that he’s not up to the job?” Shadegg asked in an interview with CNSNews.com.
  
“I would suggest that if this were a Republican member of the House, or if this were the minority leader of the House, or if this were a Bush administration official, the media would be all over these inconsistencies and saying, ‘How can anyone believe you Mr. Secretary?”

Geithner did not respond to requests for an interview from CNSNews.com or to further clarify his remarks, though a Treasury Department official did confirm that her boss had issued a clarification Wednesday after the remark prompted the dollar to tumble.
 
In that clarification, Geithner said there is“(N)o change in (the) dollar as the world's reserve currency” and that it is “likely to remain so for a long time.”

Top financial media, including Bloomberg.com, reported the dollar declined by 1.3 percent against the euro just 10 minutes after Geithner’s remarks were publicized, but the currency rebounded 15 minutes later, after Geithner clarified his comment.
 
Shadegg said he was unimpressed at the statement.
 
“I’m glad he issued a clarification, but this is not a guy from whom we ought to be getting daily clarifications,” Shadegg said.
 
“I just think that there are so many questions swirling around the guy and he’s in such a key position that it is stunning that nobody is pressing him for straightforward answers,” Shadegg told CNSNews.com.
 
Shadegg said he also wants questions asked about other apparent inconsistencies in Geithner’s sworn testimony – specifically, when the secretary learned about controversial bonuses at the federally bailed out insurance giant AIG.
 
Shadegg said the secretary was involved in the seizure and bailout of AIG in his last job -- the head of the New York Fed -- and as incoming Treasury Secretary. 

“Somebody ought to ask him point blank – and I’m sorry that it didn’t happen at the hearing this week -- How can it be, Mr. Secretary, that you wrote the Speaker of the House and said that you didn’t know about the AIG bonuses until March 10, but when you answered a question about them (to the financial services committee), you said it was seven days earlier, on March 3?”