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Timothy Geithner was sworn in as U.S. Treasury secretary, putting him at the center of a global effort to arrest the financial crisis and end what is already the nation's longest recession in a quarter-century.

The Senate voted 60-34 in his favor, the closest post-World War II margin for a Treasury secretary, after two hours of debate. Geithner, 47, overcame opposition from Republicans who objected that he underpaid federal taxes in previous years. Four Democrats also voted against him.

Geithner, who had been president of the Federal Reserve Bank of New York since 2003, inherits the worst economy in decades, a record budget deficit and a financial system reeling from $1 trillion in writedowns and losses. William Dudley, the New York Fed's markets director, is the leading contender to succeed him, according to people familiar with the deliberations.

“His work and the work of the entire Treasury must begin at once,” President Barack Obama said yesterday at Geithner's swearing-in ceremony in Washington. “We cannot lose a day because every day the economic picture is darkening.”

Geithner assumed his post on a day when companies from Caterpillar Inc. and Sprint Nextel Corp. to Home Depot Inc. announced plans to cut at least 61,000 jobs as sales withered and construction slowed amid the global economic decline.

The confirmation opens the way for the New York Fed to name a new president of the central bank's main liaison with Wall Street. An announcement may come as soon as today. Dudley, 56, is a former Goldman Sachs Group Inc. economist who joined the Fed in 2007.

Crisis Agenda

Geithner's tasks include persuading Congress to pass an $825 billion fiscal stimulus proposal, managing the second half of a $700 billion bank rescue program and weighing a slate of proposals to stabilize the financial system and pull the economy out of a 13-month recession.

“We are at a moment of maximum challenge for our economy and our country,” Geithner said in a statement at yesterday's ceremony, held in the Treasury's Cash Room. “Our agenda is to move quickly to help you do what the country asked you to do,” he said, addressing Obama.

Yesterday's Senate vote was closer than anticipated; the tally last week in the Senate Finance Committee was 18 to 5. In his confirmation hearing before the finance panel, Geithner was grilled on his failure to pay almost $50,000 in taxes. He accepted responsibility, saying his errors were “careless” and unintentional.

'Difficult Issue'

“In another time and another place this probably would have been a far more difficult issue for him to get over,” said Kevin Petrasic, a former congressional staffer who is now an attorney at Paul, Hastings, Janofsky & Walker, a law firm in Washington. Lawmakers “had to really think hard before deciding that somebody with his credentials was not the type of person we needed” during a financial crisis.

Nevertheless, the tax errors that prompted at least some of the votes against him will reduce his effectiveness, said Peter Wallison, who was Treasury general counsel under President Ronald Reagan and is now a fellow at the American Enterprise Institute in Washington.

“He just won't carry the same moral authority,” said Wallison low fee payday loans.

Senate Majority Leader Harry Reid said during the debate before the vote that Geithner has “seen the crisis unfold” and is “uniquely suited to know the difference between what has worked and what has failed.”

Strategy Soon

Geithner will announce the administration's strategy for stabilizing financial firms “soon” after Senate confirmation, Lawrence Summers, director of the White House's National Economic Council, said two days ago.

“He will be laying out the plans and principles behind our approach,” Summers said on NBC's “Meet the Press” program.

Obama is pressing for speedy passage of a stimulus plan to cut taxes, spend more on public works and preserve or create as many as 4 million jobs.

The U.S. unemployment rate in December soared close to a 16- year high of 7.2 percent; the budget gap is forecast to exceed $1 trillion even without the stimulus; and the Dow Jones Industrial Average lost 33.8 percent in 2008, the steepest annual drop since 1931.

In his written responses to lawmakers last week, Geithner said there were “no current plans” to request more financial- bailout funds, and he played down any need to nationalize U.S. banks, without specifically ruling out the option.

'Arsenal of Tools'

“The Obama administration is committed to using the full arsenal of tools available to get credit flowing again to families and businesses,” Geithner said. “We will ensure that support under this program is directed at making credit available to support recovery.”

Geithner also has affirmed the U.S. “strong dollar” policy.

“A strong dollar is in America's national interest,” he said last week. “Maintaining confidence in the long-term strength of the United States economy and the stability of the U.S. financial system is good for America as well as our trading and investing partners.”

He said the Obama administration believes China is “manipulating” its currency, a harsher tone than the Bush administration took with the country that's the biggest foreign purchaser of U.S. Treasuries.

Shrinking Economy

Gross domestic product probably contracted at a 5.5 percent annual rate from October through December, the biggest drop since 1982, according to the median estimate in a Bloomberg News survey ahead of Commerce Department figures due Jan. 30.

“The challenges facing this new administration are formidable,” Finance Committee Chairman Max Baucus, a Democrat from Montana, said at last week's hearing. “Our new president needs to have his Treasury secretary in place to help address these challenges.”

Before the vote on Geithner, seven of the 23 Treasury secretary nominees since 1945 had been considered under Senate roll-call tallies in which lawmakers' individual votes are recorded, according to research from the Senate Historical Office. The average margin of support for those seven was 95-1. The rest were approved under procedures that allow for confirmation without an official vote count.

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President Barack Obama said his administration and Congress will reach agreement within weeks on an $825 billion stimulus plan to cope with what may be an “unprecedented” economic crisis.

While there are “some differences” between his administration and lawmakers on the details, Obama said the legislation is “on target” for passage by mid-February.

“We are experiencing an unprecedented, perhaps, economic crisis that has to be dealt with,” Obama said today as he began a meeting with nine Democratic and Republican leaders at the White House, his first such session with lawmakers since taking office on Jan. 20. He also called for greater oversight of spending by financial institutions that get bailout money.

Obama is confronting a weakening economy and eroding investment values. Average home prices in November dropped 8.7 percent from a year earlier, the most in at least 18 years, the government said yesterday. Housing starts fell 16 percent last month, the number of Americans filing first-time claims for jobless benefits climbed to a 26-year high, and the Standard & Poor’s 500 Index has lost 7.9 percent since the start of the year.

House Speaker Nancy Pelosi, who was among those in the meeting, said afterward that lawmakers expect to get the legislation to Obama’s desk before the Feb. 16 President’s Day holiday, when Congress is scheduled to take a break. “If not, there will be no recess,” the California Democrat said.

Democrats’ Plan

Legislation crafted by House Democrats includes $358 billion for public works projects, $192 billion in other spending and $275 billion worth of tax cuts. The Senate has begun work on part of its version of the stimulus plan, which includes $275 billion in tax provisions, including cuts for businesses and producers of renewable energy that differ from the House package.

Congressional Republicans say Democrats are moving too quickly to enact proposals that may prove ineffective.

House Minority Leader John Boehner, an Ohio Republican, gave Obama a list his party’s ideas at the meeting, including reducing the two lowest income tax rates to 5 percent and 10 percent from 10 percent and 15 percent. That would save a married couple up to $3,200 a year in taxes, Republicans said.

The Republican plan also proposes more generous tax breaks for small businesses, making unemployment benefits tax-free, and providing a $7,500 tax credit to home buyers who can make a minimum down-payment of 5 percent. The Republicans urged Obama to reject future tax increases to offset the cost of additional government spending.

Differences

“I recognize there are still some differences around the table and between the administration and members of Congress,” Obama said, adding that both sides are unified in seeing the need to take action.

Senate Majority Leader Harry Reid, a Nevada Democrat, said there was “significant discussion” of a Congressional Budget Office analysis released earlier this week that most of the public-works spending in the stimulus plan won’t take place until sometime after 2010 payday loans for bad credit.

White House budget director Peter Orszag, in a letter to lawmakers, said the administration is “committed” to ensuring that “at least” 75 percent of the $825 billion economic stimulus package is spent by the end of the next fiscal year.

Senate Republican leader Mitch McConnell of Kentucky said he was pleased by the tone of the meeting and the willingness of Obama and the Democrats to listen to Republican ideas.

Deadline

“I do think we’ll be able to meet the president’s deadline,” McConnell said after coming out of the White House.

Boehner said he remains concerned about the size of the spending portion of the stimulus plan. “We believe spending nearly $1 trillion is more than we ought to be putting on the backs of our kids and their kids,” he said.

Obama, a Democrat, has scheduled a meeting with all House and Senate Republicans for next week.

The president criticized the way some companies getting federal bailouts are spending their money, and he said stricter accountability will be part of any future assistance.

He cited “the reports that we’ve seen over the last couple of days about companies that have received taxpayer assistance then going out and renovating bathrooms or offices or in other ways not managing those dollars appropriately.”

Redecorating

While Obama didn’t mention any individuals or companies, his comments followed reports that John Thain, the former Merrill Lynch & Co. chief executive officer ousted yesterday, spent $1.2 million redecorating his downtown Manhattan office last year as the company was firing employees.

Thain oversaw the sale of Merrill Lynch to Bank of America Corp. last month. Merrill’s $15.4 billion fourth-quarter loss forced Bank of America to seek additional aid from the U.S. government, which last week agreed to provide $20 billion in capital and $118 billion in asset guarantees.

Press secretary Robert Gibbs said the president has directed his economic team to come up with new restrictions on the second half of the $700 billion financial-rescue plan so the money won’t “line the pockets of people” who’ve gotten financial assistance.

“The American people need to be greatly assured that their hard-earned money is not going to the bonuses or the remodeling of an office at a bank that’s in trouble,” Gibbs said.

The restrictions would follow principles already outlined to Congress by Lawrence Summers, director of the White House National Economic Council, and Timothy Geithner, Obama’s nominee for Treasury secretary, Gibbs said.

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NEW YORK — For years, retailers could afford to be sloppy about running their businesses because customers kept buying. No more.

Stung by the worry that shoppers — who cut spending by the most dramatic amount in at least 39 years this past holiday season — may not start spending again for a long time, stores are making drastic changes. They are cutting out marginal suppliers, hiring outside experts to keep inventory lean, holding special events for those who are still buying and making extraordinary efforts to gauge customer satisfaction.

The new discipline will be mostly good news for shoppers, who will find stores less cluttered and see an array of products at lower prices.

Of course, the downside is that consumers who want something out of the ordinary may have to look harder. Stores are rooting out offbeat, unpopular colors and styles.

Sales clerks are also checking back with customers to see if they’re satisfied with their purchases.

"We are in a sea change," said Millard "Mickey" Drexler, J.Crew’s chairman and chief executive.

Pricing goods within reach of strapped consumers also is a big focus, given the way nervous consumers have stopped shopping. Same-store sales, or sales at stores opened at least a year, fell 2.3 percent in November and December together, according to the International Council of Shopping Centers.

J.Crew is working with factories to adjust prices on items. It’s cutting inventory and expenses.

Status denim brand Rock & Republic will ship a new Recession Collection this spring that runs about half the usual $200 price tag for its jeans.

Even supermarket chain SuperValu Inc. has promised lower everyday prices on groceries and more promotions.

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Chief executives from Crate & Barrel to J bad credit payday advance.C. Penney acknowledged during the National Retail Federation meeting this month that they’re navigating new territory, predicting that the fundamental shift by consumers to spend less and save more will linger.

The biggest unknown is when or if shoppers will resume spending the way they did when the housing market was booming, credit was easy and jobs were more plentiful.

This sudden hibernation of customers is leading even the luxury retailer to try new strategies. Neiman Marcus is eliminating some vendors and focusing on serving its best customers.

Weaning customers off discounts is a big challenge for the industry, as people got used to them — particularly on luxury brands that hadn’t been discounted before sales all but dried up.

For the past two years, many of the nation’s best-run stores, such as J.C. Penney Co., had been reducing inventories in response to the consumer spending slowdown. But no one anticipated the severe retrenchment that hit in September as the financial meltdown ravaged the economy.

As shoppers simply stopped buying, stores were forced to discount as much as 75 percent off in some cases even before the official start of the holidays — resulting in the weakest season since at least 1969, when the ICSC index began.

Some companies, including KB Toys Inc., couldn’t make it through the Christmas season, and many more are expected to file for bankruptcy in the coming months. Circuit City Stores Inc., which filed for Chapter 11 bankruptcy protection in November, said Friday it will go out of business — closing its 567 U.S. stores, after not being able to work out a sale.

With no sign of the economy improving soon, merchants are preparing for times to get worse. Those who have survived face battered fourth-quarter profits and are slashing expenses and hoarding cash.

Companies like Polo Ralph Lauren Corp. are turning to outside specialists in areas like sourcing and currency hedging to reduce the impact of volatile foreign exchange rates. And they’re trying to understand the new mindset of shoppers.

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Russian Prime Minister Vladimir Putin’s standoff with Ukraine over supplies of natural gas may have angered European Union leaders and denied heat to millions; at home, it’s winning him plaudits.

In turning off gas supplies to Ukraine and Europe, Putin showed Russians that he is in charge as a recession looms, and that the West must treat him as a key player in global energy. He also is pushing for higher long-term revenue for state-controlled OAO Gazprom, and has damaged West-leaning Ukrainian President Viktor Yushchenko.

“The more they criticize Putin abroad and the more they fight with Russia, the greater his political weight grows,” said Mikhail Delyagin, an economic adviser to former Russian Prime Minister Mikhail Kasyanov and director of the Institute for Globalization Studies in Moscow.

Russia has invited Ukraine and such gas-starved countries as Bulgaria and Slovakia to meet at an emergency summit in Moscow tomorrow. The stalemate has left parts of eastern Europe without fuel during sub-freezing temperatures. Russia and Ukraine blame each other for a failed Jan. 13 deal to resume gas flows, while EU leaders are struggling to end the crisis.

Putin will also get a chance to confront his biggest European customer today when he meets German Chancellor Angela Merkel in Berlin. The get-together probably won’t be acrimonious, according to Jan Techau, a European and security affairs expert at the Berlin-based German Council on Foreign Relations.

‘Friendly Distance’

“Merkel will maintain her friendly distance from Putin,” Techau said. “There is a consensus in Germany that good relations with Russia are important.”

Still, Merkel herself said yesterday that she saw “a general danger that Russia to a certain extent will lose its reliability if we see very long interruptions in gas deliveries.”

The dispute and Russian state-controlled media coverage of it has spotlighted Putin, 56, more than President Dmitry Medvedev, his chosen successor when he stepped down from the presidency last May. As the former KGB colonel was shown pacing Gazprom’s headquarters Jan. 13 on the Vesti-24 channel, Medvedev hosted a Kremlin banquet to honor parents with large families.

Putin’s approval rating was 83 percent in an October poll published by the Moscow-based Levada Center, and almost 90 percent in September after Russia trounced Georgia in a five-day war condemned by the EU and the U.S. No polls have been released since the gas crisis began earlier this month.

Don’t Mess With Russia

“Putin has again shown to the domestic Russian audience that he is a strong leader,” said Chris Weafer, chief strategist at UralSib Financial Corp no fax payday loans. in Moscow. “His message to the people is that nobody should mess with Russia when he is around.”

He has less sway over the economy. It may contract in the first half, plunging Russia into its first recession since 1998, presidential aide Arkady Dvorkovich said last month. The 2009 budget may show its first deficit in a decade, and Urals crude oil has plunged 70 percent from its July high.

The ruble has lost 27 percent against the dollar since the start of August, reaching a record low yesterday. Russia’s benchmark Micex stock index has tumbled almost 60 percent.

European alternatives to supplies from Gazprom are limited and no final decision has been made on financing the planned Nabucco pipeline, a rival route intended to carry central Asian gas to Europe by 2013.

Long-Term Dependence

“The dependence on Russian gas will remain the European reality for some time,” said Masha Lipman, a political analyst at the Moscow Carnegie Center.

Even if Europe is able to arrange alternatives, Gazprom’s share of the gas market in Europe is unlikely to fall below a quarter in the coming decade, according to Troika Dialog analyst Valery Nesterov.

While the dispute has cost Gazprom $1.2 billion in lost exports since the start of the year, according to Deputy Prime Minister Igor Sechin, the company is poised to benefit in the long run.

It is trying to charge market prices in Ukraine for the first time after allowing discounts that are a relic of the Soviet Union. Had Gazprom received the going rate for Europe last year from Ukraine, it would have garnered an additional $12 billion in revenue, UralSib’s Weafer estimates.

In the end, Yushchenko, who has courted the EU since leading the 2004 Orange Revolution with promises to wean Ukraine off its dependence on Russia, may suffer from his anti-Russian views. He has accused the Kremlin of playing a role in the poisoning attempt on his life during the 2004 presidential election. He also sided with Georgia during the August conflict.

“There is also a personal side to all this, as with the war with Georgia,” said Yulia Latynina, a political commentator on the Ekho Moskvy radio station. “What we are seeing now is a war with Yushchenko.”

The EU may have to weigh Ukraine’s aspirations to become a member against ensuring Russia can fill its energy needs.

“Friendship has certain boundaries,” Nesterov said. “Europe won’t sacrifice its gas to protect the interests of Ukraine.”

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Federal Reserve Chairman Ben Bernanke said on Tuesday that fiscal stimulus alone would not be enough to promote a lasting U.S. economic recovery, and further steps to backstop banks may be needed.

“Fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system,” Bernanke said at the London School of Economics.

In his first policy speech since early December, Bernanke said that while an expected U.S. fiscal stimulus package could provide a “significant boost” to the economy, the government may need to inject more capital into banks.

He also said a large quantity of distressed assets on bank balance sheets made it difficult for banks to raise capital and lend.

Bernanke said the government could consider buying troubled assets, providing asset guarantees or setting up a so-called bad bank to take over assets in exchange for cash and equity.

“With the worsening of the economy’s growth prospects, continued credit losses and asset markdowns may maintain for a time the pressure on the capital and balance sheet capacities of financial institutions,” he said.

It would also take some time for the U.S. labor market to recover, Bernanke said. “I would expect to see continued weakness in the first quarter,” he said in response to a question.

“I am hopeful that later in 2009, depending on factors, particularly including financial and credit markets, we should begin to see some stabilization in the economy payday loans. It takes a while though for labor markets to recover.”

GLOBAL ECONOMY TAKES A HIT

Bernanke flagged the need for regulatory reform and said he had discussed the issue, as well as monetary policy, with British Prime Minister Gordon Brown, Chancellor of the Exchequer Alistair Darling and Bank of England Governor Mervyn King.

“It is very important for us to try to put out the fire. It is good advice in general that if there is a fire burning, you try to put it out first and then you think about the fire code,” he said.

“Going forward, we have to look at the fire code — we have to think about what is the right balance of regulation, markets that will give us a powerful innovative financial system but one that will be safer to use.”

Bernanke also said the way in which governments respond to the financial crisis racking the global economy would determine the timing and strength of recovery.

“For almost a year and a half the global financial system has been under extraordinary stress — stress that has now decisively spilled over to the global economy more broadly,” he said. “The damage, in terms of lost output, lost jobs, and lost wealth, is already substantial.”

Bernanke said the Fed still has “powerful tools” that could be expanded to spur a rebound even though it has cut benchmark interest rates to near zero. 

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Venezuela’s Citgo Petroleum said Wednesday that it has reinstated a program that provides discounted home heating oil to lower-income residents in U.S. communities, two days after it was suspended.

"Our flagship social program, the Citgo-Venezuela Heating Oil Program will continue," said Citgo Chairman Alejandro Granado in a statement.

Granado said the decision to continue the program was in response to "the current global financial crisis and its impact on the oil industry in general."

On Monday, the program was put on hold so that Citgo could re-evaluate its social programs in light of the global economic slowdown and falling oil prices.

The abrupt reinstatement of the program appears to have come at the behest of Venezuelan President Hugo Ch

Russia accused Ukraine of stealing gas destined for the rest of Europe on Friday, a day after cutting supplies to its neighbor in a contract dispute.

The volumes Russian export monopoly Gazprom said Ukraine was off siphoning were small, but the accusation suggested Moscow was in no mood for compromise in a re-run of a 2006 argument that led to supply shortages across the E.U.

Gazprom said it was responding to Ukraine’s actions by increasing exports via alternative routes, including Belarus. Energy companies in Europe said they had not felt any disruptions to their supplies since the cut-off.

"The Ukrainian side openly admits it is stealing gas and is not ashamed of this," Gazprom spokesman Sergei Kupriyanov said.

The European Union - which receives a fifth of its gas via pipelines through Ukraine - said it considered the dispute between Moscow and Kiev to be a bilateral issue and would not step in unless supplies to Europe started to suffer.

The dispute could raise new doubts about Moscow’s reliability as an energy supplier and fuel suspicions in the West - already running high since Russia’s war with Georgia last August - that the Kremlin bullies its pro-Western neighbors.

Russia denies politics are behind the dispute and says it is about prices and debts, but the two ex-Soviet neighbors have clashed over a drive by Ukrainian President Viktor Yushchenko to take his country into the NATO alliance.

If talks do resume between Ukrainian state energy company Naftogaz and Gazprom, the gulf between their negotiating positions is wide.

Gazprom spokesman Kupriyanov said Ukraine had agreed to ship 296 million cubic meters to Europe on Jan. 3, not the 303 million cubic meters that Russia had requested.

Ukraine had earlier said it was diverting 21 million cubic meters a day of supplies destined for Europe so that it could maintain pressure in its pipeline system and keep transit supplies flowing.

Energy firms in Hungary, Poland, Bulgaria and Turkey said on Friday their supplies were unaffected, echoing importers in most European countries who earlier reported they had not seen any drop in deliveries no fax cash advance.

Europe, where temperatures fell below freezing overnight, has enough gas stockpiled to manage without Russian supplies for several days but could face difficulties if any disruption stretched into weeks, analysts said.

"We are not going to interfere until the moment when the pressure of gas reaches some low limits," Czech E.U. presidency spokesman Jiri Potuznik said.

Alexei Miller, CEO of Gazprom, said on Thursday he wanted Ukraine to pay $418 per 1,000 cubic meters of gas, compared with the $179.5 Kiev paid in 2008. Ukraine says the most it can afford to pay is $235.

Gazprom charges about $500 per 1,000 cubic to customers in the European Union, though that is likely to fall by up to half this year. Gas prices track oil and crude has plummeted in value.

The E.U. is keen to avoid a repeat of a January 2006 dispute when Moscow cut off supplies to Ukraine, causing a brief reduction in gas deliveries to other parts of Europe in mid-winter.

Hungary’s Natural Gas Transmission Company, owned by energy firm MOL said it was keeping a close watch on supplies from Russia. "We have not seen a decline in pressure, it is in line with the contracted level," said spokeswoman Edina Lakatos.

Ukraine’s Naftogaz said it guaranteed uninterrupted supplies of Russian gas to Europe and that it was drawing the fuel from underground stockpiles to meet its own needs. Temperatures in Kiev were about 8 degrees Celsius below zero.

Russia says its dispute with Kiev is purely commercial. Squeezing more money from Ukraine is particularly pressing for Gazprom now as its finances have been hurt by the global financial crisis and gas prices are on the way down.

A protracted dispute is likely to hurt the Ukrainian economy, already reeling from a drop-off in investor confidence and steep falls in the hryvnia currency that have not been stemmed by an International Monetary Fund loan. 

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