Geithner did not show evidence of rigged Libor, British bank official says

July 18, 2012

By  and , Washington Post

Libor — the London interbank offered rate— serves as a benchmark for mortgages, student loans, auto loans and many other financial contracts and is an indicator for the health of the banking industry.

The scandal was exposed late last month when the British bank Barclays agreed to pay $450 million to regulators to settle allegations it manipulated Libor in years preceding and during the financial crisis.

Barclays admitted to artificially lowering its Libor rate, which made the bank appear to be healthier than it really was in the midst of the crisis. It also acknowledged that several traders rigged the rate for personal profit. Other banks are also being investigated.

Libor is calculated in Britain and reflects the borrowing costs of 18 banks, including firms in Europe and Japan and three American institutions: Bank of America, Citigroup andJPMorgan Chase.

On Tuesday, elected officials wanted to know from top financial policymakers what they knew and when they knew it.

In Britain, a parliamentary committee asked King about evidence amassed by the Federal Reserve Bank of New York in April 2008 that Barclays was manipulating Libor.

The New York Fed on Friday disclosed that it had early evidence of ma­nipu­la­tion — including a phone call in which a Barclays executive admitted to a Fed staffer that the British bank was manipulating the rate.

“The New York Fed did not raise any evidence of wrongdoing with regards to Libor,” replied King, who said that he received only a memo of suggestions from then-New York Fed President Timothy F. Geithner, now the U.S. Treasury secretary,on reforming the rate.

Later in the day, Bernanke defended the Fed’s actions. He noted that beyond providing advice to the Bank of England, the New York Fed also presented its concerns to a broader group of U.S. financial regulators.

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