But this person, who spoke on condition of anonymity because Geithner never publicly named Nazareth as his choice, said no problems with her taxes or other issues arose.
Nazareth, a partner at the law firm Davis Polk & Wardwell, could not be reached for comment. Treasury and White House officials would not comment on the matter.
Nazareth's withdrawal from consideration comes as critics say Geithner's lacks the senior staff he needs to make critical decisions about the financial crisis. Not one of his top 17 deputies has been named, let alone confirmed.
Without senior leadership, lower-level Treasury employees can't make decisions or represent the government in crucial conversations with banks and others.
At a Senate hearing Thursday about failed insurance giant American International Group Inc. - which has received four separate bailouts totaling more than $170 billion - Sen. Chris Dodd said he had asked Treasury for someone to appear, but that no one was available.
"I am not pleased that we don't have someone here from Treasury to explain what their role in this is," Dodd said.
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