–Treasury Secretary To Testify Thurs To Key House, Senate Panels
–Two Senate Panels To Hold Confirmation Hearings For OMB Nominee Lew
–Congressional Debate On Bush Tax Cuts Set To Intensify
–Hill Leaders Begin To Assess Length of Stop-Gap Bill To Fund Gov

By John Shaw

WASHINGTON (MNI) – As Congress returns from its summer recess this
week, Treasury Secretary Tim Geithner will testify to two key
congressional panels on his department’s semi-annual international
economic and foreign exchange report.

Geithner will testify Thursday on the Treasury report before the
Senate Banking Committee at 10 a.m. and then again at 2 p.m. before the
House Ways and Means Committee. The Ways and Means panel will also hold
a Wednesday hearing on China currency issues but has not yet released a
list of witnesses.

The Treasury secretary will describe and defend the report which
was due on April 15 but released on July 8th. An updated report from
Treasury is due in October.

Geithner is likely to spend Thursday on the defensive, as he tells
skeptical lawmakers why Treasury determined that no major trading
partner, including China, manipulated its currency.

The congressional reaction to the Treasury report when it was
released ranged from politely skeptical to brutally scathing.

The Treasury secretary is almost certain to tell lawmakers that he
shares their frustration with China, but will urge them to hold off on
any legislation this fall as he continues to press Chinese officials in
private meetings.

While some lawmakers want to press ahead now with currency
legislation, they face a daunting, nearly impossible, congressional
schedule. The House and Senate are scheduled to be in session only
until Oct. 8 before breaking before the mid-term elections. (There has
been speculation that the House may leave Washington a week earlier than
scheduled.)

In other matters this week, both the Senate Budget and Senate
Homeland Security and Governmental Affairs committees will hold a
confirmation hearing Thursday for Jack Lew to become the White House
budget director.

Lew will appear before the Senate Budget Committee at 10 a.m.
Thursday and at 2:30 p.m. before the Homeland Security and Governmental
Affairs Committee.

The Senate Banking Committee will hold a hearing Wednesday at 10
a.m. on the issue of covered bonds. No cabinet level officials will
testify, but there will be sub-cabinet representatives from the FDIC and
the Comptroller of the Currency as well as academic experts on the
issue.

As Congress returns for its fall session, lawmakers are expected to
sharpen the debate on the merits of extending all or part of the 2001
and 2003 Bush tax cuts that expire at the end of the year.

In a surprising move, House Minority Leader John Boehner said
Sunday he would be willing to accept Obama’s more limited tax cut
extension plan.

In an appearance on CBS’s “Face The Nation,” Boehner said he
strongly prefers the permanent extension of all of the so-called Bush
tax cuts of 2001 and 2003. But Boehner said for the first time that he
might be willing to accept — grudgingly — Obama’s approach.

“If the only option I have is to vote for some of those tax
reductions, I will vote for that,” Boehner said.

Boehner later put out a statement saying that he still strongly
prefers extending all of the 2001 and 2003 tax cuts.

Both the Obama administration and congressional Democrats have
repeatedly said that tax cuts for individuals making up to $200,000 and
couples earning up to $250,000 should be extended.

The cost of extending these tax cuts would be about $1.4 trillion
over a decade. Extending all of the 2001 and 2003 tax cuts would cost
more than $2 trillion over a decade.

Congressional Republican leaders have supported extending all of
the 2001 and 2003 tax cuts.

Finally, congressional leaders will begin to intensify talks on
passing a stop-gap spending bill that would fund the government for at
least part of the 2011 fiscal year that begins Oct. 1.

So far, Congress has passed none of 12 annual spending bills for
FY11. A stop-gap bill that funds the government until at least after the
Nov. 2 mid-term elections is expected.

Not yet on any formal agenda are the pending Senate votes on the
confirmation of San Francisco Federal Reserve Bank President Janet
Yellen as a governor and vice chair, and on Sarah Bloom Raskin as
governor. The next FOMC meeting is Sept. 21 and Donald Kohn left the
board Sept. 1.

** Market News International Washington Bureau: 202-371-2121 **

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