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Geithner said he would remain in his Treasury post "for the foreseeable future" and sidestepped a direct question about his career plans after a flurry of media reports that he was mulling leaving the Obama administration.

"I've only worked in public service. I live for this work. It's the only thing I've ever done, I believe in it," Geithner said. "We have a lot of challenges as a country, and I'm going to be doing it for the foreseeable future."

Geithner is one of the last members of President Barack Obama's original economic team. He has faced intense criticism, including at times calls for his resignation, but has prevailed to win a reputation as a steady hand amid turbulent times.

"We hate to say it but this looks like the A-Team is resigning without anyone credible coming off the bench to win the game," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi in New York.

"These will be very big shoes to fill."

Bloomberg News, which first reported Geithner's possible departure, cited unnamed sources as saying that family considerations were among the factors Geithner was weighing. ABC News reported that there "are far too many caveats" to say Geithner will definitely depart.

A Treasury official said that Geithner has not yet made a decision.

Geithner's family is expected to move to New York in a few months and he told former President Bill Clinton at an event in Chicago that his son will finish his final year of high school in New York, adding he might be commuting for a while.

Obama would face a tough choice in replacing him at Treasury, and any successor could face a grueling and long quest to win the Senate's needed confirmation.

Among those Obama could consider are General Electric chief Jeff Immelt, who already heads a council that advises the White House, New York Mayor Michael Bloomberg, or JPMorgan Chase & Co Chairman and CEO Jamie Dimon.

WINDOW OF OPPORTUNITY

Politics could weigh on Geithner's decision. If he stays past late summer or fall, he could feel an obligation to stick with President Barack Obama through what may be a difficult campaign for reelection in 2012.

A person familiar with Geithner's thinking said the Treasury chief realizes he might have a window to potentially depart after a deal to raise the debt limit and reduce U.S. deficits is reached.

"People are a little worried or interested because I have a family, my son's going back to New York to finish high school and I'm going to be commuting for awhile," Geithner said at the conference in Chicago.

Geithner, 49, led the New York Federal Reserve Bank before joining the Obama administration, where he played a lead role in combating the 2007-2009 financial crisis. He continued efforts to guide the economy back to health at Treasury.

Austan Goolsbee, chairman of the White House Council of Economic Advisers, who is leaving in August, told CNBC that news of Geithner's potential departure was "a bit of a surprise."

"I know his overwhelming focus is to get this debt ceiling and deficit reduction worked out," Goolsbee said.

MORE WORK TO DO

Geithner has been warning all year of catastrophic consequences if Congress fails to increase the nation's $14.3 trillion borrowing limit. He has said the Treasury will no longer be able to pay all the nation's bills -- including interest on the national debt -- after August 2.

Geithner has spent most of his career in public service and it is unclear what direction his career would take in the future.

At the New York Fed, he presided over collapses and bailouts of major Wall Street banks and insurer American International Group.

As Treasury secretary he has spent much of his tenure under fire. He took the helm during the depths of the recession in February 2009 by announcing a plan to cleanse bank balance sheets of toxic assets, but the proposal was criticized as inadequate and markets plunged.

A year later, some lawmakers called for his ouster over his handling of the AIG bailout. This year, he has taken heat over slowing job growth and an ineffective housing rescue program.

Clinton, whom Geithner served under at Treasury in the 1990s, offered fulsome praise on Thursday.

"Unlike most people who get this job, who made a lot of money in business or in finance, he has spent most of his life serving the rest of us and in the process has acquired an enormous amount of expertise and knowledge to go with a considerable amount of common sense," Clinton said. "I think he's done a great job in a back-breaking position."

(Additional reporting by Glenn Somerville, Rachelle Younglai and David Lawder in Washington, and Ann Saphir in Chicago; Writing by David Lawder; Editing by Carol Bishopric)

A U.S. Treasury official confirmed that Geithner had not yet made a decision on whether to leave the Obama administration.

Geithner is expected to address reports of his possible early departure at a forum in Chicago later on Thursday.

Bloomberg News, which first reported the story, cited unnamed sources as saying that family considerations were among factors that Geithner was weighing. ABC News reported that there "are far too many caveats" to say that Geithner will definitely depart.

A person familiar with Geithner's thinking said the Treasury chief realizes he might have a window to potentially depart after a deal to raise the debt limit and reduce U.S. deficits is reached.

Geithner is the last remaining top member of President Barack Obama's original economic team. Council of Economic Advisers Chairman Austan Goolsbee is planning to leave the administration in August to return to the University of Chicago.

Goolsbee told CNBC on Thursday that news of Geithner considering a departure was "a bit of a surprise."

"He's a good friend. I know his overwhelming focus is to get this debt ceiling and deficit reduction worked out," Goolsbee said.

Geithner, 49, has been warning all year of catastrophic consequences if Congress fails to increase the $14.3 trillion statutory borrowing limit and the United States defaults on its debt. He has said the Treasury will no longer be able to pay all the nation's bills -- including interest on the national debt -- after August 2.

Geithner, 49, has spent most of his career in the public sector and does not have a university position or banking job waiting for him. Prior to taking the top job at Treasury, he was president of the Federal Reserve Bank of New York and held key positions before that at the International Monetary Fund and the Treasury during the Clinton administration.

(Reporting by Tim Ahmann, Glenn Somerville, Rachelle Younglai and David Lawder; Editing by James Dalgleish and Jan Paschal)

When the Treasury Department revamped its rules for participating in government bond auctions two years ago, officials said they were simply modernizing outdated procedures.

The real reason for the change, a Reuters investigation has found, was more serious: The Treasury had concluded that China was buying much more in U.S. government debt than was being disclosed, potentially in violation of auction rules, and it wanted to bring those purchases into the open - all without ruffling feathers in Beijing.

Treasury officials then worked to keep the reason for the auction-rule change quiet, with the acting assistant Treasury secretary for financial markets instructing subordinates to not mention any specific creditor's role in the matter, according to an email seen by Reuters. Inquiries made at the time by the main trade organization for Treasury dealers elicited the explanation that the change was a "technical modernization," according to a document seen by Reuters. There was no mention of China.

The incident calls into question just how clear a handle the Treasury has had on who is buying U.S. debt. Chinese entities hold at least $1.115 trillion in U.S. government debt, and are thought to account for roughly 26 percent of the paper issued by Washington, according to U.S. government data released on June 15.

China's vast Treasury holdings are both a lifeline and a vulnerability for Washington - if the Chinese sold their Treasuries all at once, it could undermine U.S. markets and the economy by driving interest rates higher very quickly. Scenarios of this sort have been discussed in Washington defense-policy circles for at least a year now. Not knowing the full extent of these holdings would make it even more difficult to assess China's political leverage over U.S. finances.

The Treasury has long said that it has a diversified base of investors and isn't overly reliant on any single buyer to digest new U.S. Treasury issuance. Evidence that China was actually buying more than disclosed would cast doubt on those assurances.

THE 'GUARANTEED' BID

The United States sells its debt to investors through auctions that are held weekly - sometimes four times per week - by the Treasury's Bureau of the Public Debt, in batches ranging from $13 billion to $35 billion at a time. Investors can buy the bonds directly from the Treasury at auctions, or through any of the 20 elite "primary dealers," Wall Street firms authorized to bid on behalf of customers. The Treasury limits the amount any single bidder can purchase to 35 percent of a given auction. Anyone who bought more than 35 percent of a particular batch of Treasury securities at a single auction would have a controlling stake in that batch.

By the beginning of 2009, China, which uses multiple firms to buy U.S. Treasuries, was regularly doing deals that had the effect of hiding billions of dollars of purchases in each auction, according to interviews with traders at primary dealers and documents viewed by Reuters.

Using a method of purchases known as "guaranteed bidding," China was forging gentleman's agreements with primary dealers to purchase a certain amount of Treasury securities on offer at an auction without being reported as bidders in that auction, according to the people interviewed. After setting the amount of Treasuries the guaranteed bidder wanted to buy, the dealer would then buy that amount in the auction, technically on its own behalf.

To the government officials observing the auction, it would look like the dealer was buying the securities with the intent of adding them to its own balance sheet. This technicality does not preclude selling them later in the secondary market, but does influence the outcome of bidding in the auction, by obscuring the ultimate buyer. In fact, the dealer would simply pass the bonds on immediately to the anonymous, guaranteed bidder at the auction price, as soon as they were issued, according to the people interviewed.

The practice kept the true size of China's holdings hidden from U.S. view, according to Treasury dealers interviewed, and may have allowed China at times to buy controlling stakes - more than 35 percent - in some of the securities the Treasury issued.

The Treasury department, too, came to believe that China was breaching the 35 percent limit, according to internal documents viewed by Reuters, though the documents do not indicate whether the Treasury was able to verify definitively that this occurred.

Guaranteed bidding wasn't illegal, but breaking the 35 percent limit would be. The Uniform Offering Circular - a document governing Treasury auctions - says anyone who wins more than 35 percent of a single auction will have his purchase reduced to the 35 percent limit. Those caught breaking auction rules can be barred from future auctions, and may be referred to the Securities and Exchange Commission or the Justice Department.

The Treasury Department generally does not comment on specific investors but a source in the department said China was not the only Treasury buyer striking guaranteed bidding deals.

People familiar with the matter named Russia as being among the guaranteed bidders. But Russia's total Treasury holdings, while significant, represent 2.8 percent of outstanding U.S. debt, versus one-fourth for China's.

CHANGING THE RULE

Traders at primary dealers did not have the same diplomatic concerns about the level of Chinese buying. But they did have reasons to dislike guaranteed bidding, and they began clamoring for a change. One trader said in an interview he first brought the issue to the attention of Treasury officials in 2007.

Some primary dealers began expressing concern that the deals were opaque in a way akin to the Salomon Brothers Treasury trading scandal in the early 1990s. In that case, traders from the securities firm submitted false bids under other bidders' names in Treasury auctions in order to more closely control the results, and their bids altered the auction prices. The idea that unseen bidders were again influencing auction prices raised similar concerns among traders.

There were also commercial concerns: Dealers say that knowing that the practice was going on at other firms made them less confident they could see and understand overall patterns of buying in the Treasury market. Such visibility can be one of the greatest benefits of being a primary dealer, since the service itself often doesn't pull in big profits directly.

Some traders at primary dealers say they simply refused to do the deals and ended up turning away customers, including China. That irked sales colleagues who were promising clients guaranteed bidding deals.

At the beginning of 2009, Treasury officials began discussing the issue of guaranteed bidders, with a focus on China's behavior, internal documents seen by Reuters show. The culmination of their efforts was a change to the Uniform Offering Circular published on June 1, 2009 that eliminated the provision allowing guaranteed bidding.

Treasury Secretary Timothy Geithner was in Beijing that day meeting with Chinese government officials on his first formal visit to China since taking up his cabinet post. There is no evidence he discussed the rule change with Chinese officials there.

A spokeswoman for the Treasury Department said: "We regularly review and update our auction rules to ensure the continued integrity of the auction process. The auction change made in June 2009 eliminated some ambiguity in auction rules and increased transparency, which ultimately benefits taxpayers and investors."

The rule change had an immediate impact.

In the first auctions conducted after guaranteed bidding was banned, a key metric rose sharply: the percentage of so-called indirect bidders, those who placed their auction bids through primary dealers. Indirect bidders are seen as a proxy measure for foreign central bank buying, because foreign central banks most often bid through primary dealers. With the elimination of the guaranteed bidder provision, far more buyers were put in this class in reports to the Treasury Department.

The seven-year U.S. Treasury note, which was sold in sizes of between $22 billion and $28 billion once a month from February 2009 to September 2009, had an average indirect bid percentage of 33 percent from February through May. But from June to September the average indirect bid rose to 63 percent.

(Graphic: r.reuters.com/hyn42s)

BIDDERS REACT

Shortly after the Treasury revised the auction rules, U.S. officials learned from dealers that some bidders were seeking to continue using guaranteed bids. According to a Treasury document, a large client asked one primary dealer whether the Treasury might make an exception to the new rule for them. Neither the client nor the dealer were named.

Deutsche Bank, Goldman Sachs, JPMorgan, RBS Securities and UBS all received calls from clients asking for secret bid arrangements immediately after the rule change went into effect, according to the internal Treasury document, a summary of inquiries received seeking guidance from dealers after the rule change.

Deutsche Bank, according to the document, said their client canceled a bidding deal. Goldman told Treasury that a large client would be going to other dealers who in the past had done the deals after Goldman turned them away, the document said.

JPMorgan asked if there were any exceptions to the new prohibition on guaranteed bids. RBS said it actually struck a deal with a customer for a guaranteed bid after the rule change, but it used a different structure and wanted to know what was legal. UBS told the New York Fed that its former guaranteed-bidder client would now change its behavior and buy Treasuries in the secondary market directly after an auction, according to the document.

Spokespeople for Goldman Sachs and UBS declined to comment for this story. Deutsche Bank, RBS, and JPMorgan did not respond to requests for comment.

The change came at a delicate time in U.S.-Chinese financial relations. China, long a major buyer of American government securities, was at the time snapping up huge amounts of debt as Washington was suffering a sharp drop in tax revenue during a crushing recession.

Almost all of the business of buying Treasuries on behalf of the Chinese government is conducted by China's State Administration of Foreign Exchange (SAFE), an arm of the Chinese central bank which manages China's currency reserves, which include large amounts of U.S. Treasury bonds.

SAFE, for its part, was facing heat in China over the extent of its U.S. holdings. SAFE was hit hard by the collapse of Lehman Brothers, the doomed investment bank that was SAFE's trading counterparty in the U.S. overnight-lending market. And the potential losses SAFE faced upon the collapse of the U.S.-backed mortgage titans Fannie Mae and Freddie Mac whipped up such a storm in China that Chinese officials publicly berated the Americans for lapses in financial stewardship. (For more, click on link.reuters.com/qec28r )

SAFE officials in Beijing did not respond to a request for comment.

After evidence mounted that China was disconcerted by the auction-rule change, U.S. officials moved to tweak the system, to offset some of the pinch of the stricter bidding rules. The move gave big buyers a way to maintain some anonymity, by increasing the amount of securities it was possible to buy at a single auction without having to declare the purchase in a letter to the New York Fed.

The old requirement stipulated that any purchase of $750 million in Treasury securities had to be declared by the buyer in a letter to the New York Fed. Officials increased the threshold to $2 billion.

'TECHNICAL MODERNIZATION'

The official explanation for eliminating guaranteed bidders did not mention foreign central banks at all. It focused instead on "technical modernization" of auction rules.

One government official warned others in a written message "not to include the words 'China' or 'SAFE' in email subjects." The Securities Industry and Financial Markets Association, the main trade organization for Treasury dealers, asked the Treasury in early June 2009 to explain the change. The Treasury's response: It had found that a detail in its auction rules no longer applied to the way auctions were conducted, and so the rule was changed, according to an internal Treasury memo.

Separately, the Treasury's acting assistant secretary for financial markets, Karthik Ramanathan, told subordinates in an email: "Please let's stick to the 'Modernization of Auction Rules' when outside requests come in on the (rule) change. Please DO NOT emphasize the guaranteed bid portion, or mention any specific investors."

Ramanathan, who left the Treasury in March of 2010 and is now senior vice president and director of bonds at Fidelity Investments in Merrimack, New Hampshire, declined to comment.

The Federal Reserve Bank of New York, which interacts directly with primary dealers on Treasury auctions, issued a strongly worded letter on June 23, 2009, dealers say, urging them to "comply with the spirit as well as the letter of this recent auction rule clarification."

"That was how we knew they wanted us to tell them who was buying what," said a trader at one primary dealer.

(Additional reporting by Kristina Cooke and Benjamin Kang Lim; Editing by Michael Williams and Claudia Parsons)

* News Corp (NWSA.O) secured UK government backing for its controversial buyout of BSkyB (BSY.L) on Thursday after the minister responsible rejected complaints the move would give Rupert Murdoch too much power and influence.

* The Labor Department releases at 1230 GMT first-time claims for jobless benefits for the week ended June 25. Economists forecast a total of 420,000 new filings compared with 429,000 in the prior week.

* AMR Corp's (AMR.N) American Airlines is negotiating with aircraft makers Airbus (EAD.PA) and Boeing Co (BA.N) to replace its entire domestic fleet by purchasing at least 250 airplanes in a deal valued at about $15 billion, the Wall Street Journal reported.

* The Institute for Supply Management-New York releases at 1230 GMT June index of regional business activity. In May, the

index read 534.0.

* At 1345 GMT, the Institute of Supply Management Chicago releases June index of manufacturing activity. Economists in a

Reuters survey forecast a June reading of 54.0 compared with 56.6 in May.

* Greece's government expects to pass a second austerity bill on Thursday to pull the country back from default by securing more EU and IMF funds.

* The Federal Reserve ends its $600 billion bond-buying program, known as QE2, on Thursday and has yet to offer any hints of more monetary easing to come.

* Eli Lilly and Co (LLY.N) is committed to spending what it takes to come up with innovative drugs over the long term, its chief executive said, even though the company's earnings are expected to tumble over the next three years.

* Companies reporting results include Apollo Group (APOL.O), Darden Restaurants Inc (DRI.N) and McCormick & Co Inc (MKC.N).

* The Dow Jones industrial average .DJI gained 72.73 points, or 0.60 percent, to 12,261.42 on Wednesday. The Standard & Poor's 500 Index .SPX rose 10.74 points, or 0.83 percent, to 1,307.41. The Nasdaq Composite Index .IXIC added 11.18 points, or 0.41 percent, to 2,740.49.

* The pan-European FTSEurofirst 300 .FTEU3 index of top shares was up 0.2 percent on Thursday, while Japan's Nikkei average .N225 closed 0.2 percent higher.

(Reporting by Atul Prakash; Editing by Hans-Juergen Peters)

The government of Prime Minister George Papandreou, which won a first vote on Wednesday by 155 votes to 138, expects to pass the second and final bill covering detailed measures to implement the 28 billion euros in tax hikes, spending targets and privatizations agreed as a condition of an EU/IMF bailout.

Parliament resumed debate at 9:30 a.m. (0630 GMT) and the decisive vote is not expected before 2 p.m. (1100 GMT).

After two days of violent protests in central Athens, which ground to a halt during a 48-hour strike by powerful public and private sector unions, teams of street cleaners swept up broken masonry and shattered glass overnight.

Only one member of the ruling Socialist party voted against Wednesday's bill and he was immediately expelled, leaving the government with 154 deputies in the 300-seat chamber.

Before the vote, it had not yet been decided whether deputies would be allowed to vote on individual clauses as well as for the overall law, as is common in Greece.

While Socialist lawmakers are expected to approve the legislation as a whole, some would vote against individual clauses, such as increases in a levy on heating oil and a rise in the minimum income tax threshold. In a bid to win over waverers, new Finance Minister Evangelos Venizelos offered some concessions on tax measures on Wednesday.

The conservative New Democracy opposition, which voted against the first bill but is broadly in favor of privatizations and some other reforms, said it was willing to support some measures in the second bill to have it passed.

"We will do what we can to support the government. Today we will vote for two chapters in the implementation law," said New Democracy lawmaker Nikos Dendias, a former justice minister.

Parliament must approve both bills for the European Union and International Monetary Fund to release a 12 billion euro loan -- essential for Greece to meet debt payments in July -- under a 110-billion-euro bailout agreed in May 2010.

World stocks rallied on Thursday for the third day running and the euro rose to its highest dollar level in 20 days on relief that Greece looked set to avoid the euro zone's first debt default.

Tents and protest banners remained in Syntagma Square outside parliament where demonstrators have camped for more than a month to show their anger at austerity measures driving many Greeks to desperation during the worst recession since the 1970s.

"The implementation law will pass, without problems," said Costas Panagopoulos, head of ALCO pollsters. "The problem for Papandreou is not in parliament, it is what is happening outside parliament: not in Syntagma Square which is just a few hundred protesters, but with the whole of Greece's 11 million people."

Implementing the measures will be hard for the government, which has fallen behind the opposition in opinion polls and has faced heated criticism from its own deputies.

Unions have vowed to oppose privatizations and other austerity steps. The Socialists, who halted Greece's privatization process when they came to power, must sell off 5 billion euros in assets this year or risk missing the targets under its EU/IMF program, which would cut off funding again.

"If Papandreou and Venizelos miss this last chance and do not proceed with the needed reforms and a real shrinking in the wasteful state, they and the country will face an explosive situation in the autumn with no way out," wrote center-right daily Kathimerini in an editorial.

The anger among the Greek population was underlined by violence on Syntagma Square as votes on the first bill were being counted.

Hooded youths and police fought battles into the night. The protesters set fire to the post office in the building where the Finance Ministry is located, and tried to set a bank ablaze. Across the square, the luxury King George Hotel was evacuated.

Doctors working with the demonstrators said they had treated at least 25 people for minor injuries and hundreds with respiratory problems at the adjacent Syntagma metro station. At least 40 police officers were hurt, the police union said.

The laws are also needed for talks on a planned second and longer-term bailout of about the same size, which will include some 30 billion euros in private sector participation.

Locked out of bond markets, Greece needs the extra cash to avert default and keep the debt crisis from spilling over to the rest of the euro zone.

(Additional reporting by Harry Papachristou and George Georgiopoulos; Editing by Robert Woodward)