Geithner says he did all he could to address Libor problem

WASHINGTON Wed Jul 25, 2012 6:58pm EDT

1 of 7. Treasury Secretary Timothy Geithner testifies regarding the annual report of the Financial Stability Oversight Council before the House Financial Services Committee on Capitol Hill in Washington, July 25, 2012.

Credit: Reuters/Jonathan Ernst

WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner, under pressure for not doing enough to stop fraudulent manipulation of a key benchmark interest rate, told lawmakers on Wednesday he alerted the appropriate authorities "early on."

In his first chance to defend his actions on the widening Libor scandal before Congress, Geithner said he became aware of the problem in 2008, when he was president of the New York Federal Reserve Bank, an influential bank regulator.

Documents released by the Fed bank show that, as early as August 2007, Barclays told Fed analysts about possible problems with low levels of Libor.

"We, at least I, first learned about those concerns in the early parts of spring of 2008 and we acted very quickly at that stage. At that time, this is in the spring of 2008, we took a very careful look at these concerns, we thought those concerns were justified," Geithner said.

"And we took the initiative to bring those concerns to the attention of the broader U.S. regulatory community, including all the agencies that have responsibility for market manipulation and abuse," he said, citing a specific meeting of the president's working group on financial markets.

That group includes the Commodity Futures Trading Commission, the Securities and Exchange Commission and the Treasury Secretary himself.

Lawmakers were not buying it, noting that the Fed itself continued to use Libor as a benchmark in its emergency lending programs, including the controversial bailout of AIG.

Congressman Scott Garrett asked Geithner why his response in the face of alleged fraud had been so muted.

"You have been before this committee countless numbers of times since 2008 and if this is the crime of the century, as so many people are reporting today, never once did you ever once come and mention it as being a problem, never once did you come here and say this is what you're going to do about it," said Garrett.

BRITAIN'S PROBLEM

Geithner has repeatedly defended his actions, saying he told the British authorities who oversee the British Bankers' Association that sets Libor.

"We felt, and I still believe this, that it was really going to be on them," he said. "These concerns were in the public domain," he added, citing newspaper reports of alleged rate-rigging by large global banks.

Geithner, who is expected to step down even if President Barack Obama is reelected, came under fresh attack from members of the House of Representatives Financial Services Committee. Congressman Jeb Hensarling seized on the Fed's continued use of Libor.

"It appears that the early response was to keep using it, which means it appears that you treated it as almost a curiosity or something akin to jay-walking instead of highway robbery," said Hensarling.

Geithner replied: "I think that was the best choice at the time."

Barclays Plc has since admitted to giving false information as part of setting the interest rate in a settlement with U.S. and UK authorities. Dozens of big banks, such as JPMorgan Chase & Co, are under investigation.

The House Financial Services Committee has asked the New York Fed for all communications going back to August 2007 with the banks that helped set Libor, or the London interbank offered rate.

The first trove of documents from the New York Fed showed that Barclays had flagged concerns as early as 2007 and Geithner sent the email to Bank of England Governor Mervyn King in June 2008 with the Libor recommendations.

Last week, Fed Chairman Ben Bernanke told lawmakers the process for setting the rate was structurally flawed and said reforms were in the hands of the private UK banking group responsible for Libor.

(Editing by Neil Stempleman and James Dalgleish)

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Comments (18)
SeaWa wrote:
Geithner has been under constant attack. We are so darned lucky to have him. Without him, we would have ended up like the EZ. He gets it from both sides.

Jul 25, 2012 12:57pm EDT  --  Report as abuse
Ashishnfl wrote:
Geithner now all you can do is resign with no pension or spend remaining time of your office in prison for failing to report crime to congress as fed chairman and also as treasury sec.

Jul 25, 2012 1:37pm EDT  --  Report as abuse
Janeallen wrote:
I saw Charlie Rose’s interview with Geithner just days ago.
It’s shameful that America has a Treasury Secretary who is SO blind to his share of responsibility for our financial woes, and speak with SUCH SERIOUS DEMEANOR AS IF HIS SPIN IS GOSPEL TRUTH!

What Geithner failed to do are

(1) As soon as he knew about the Libor fixing:
blow the whistle,
explain the economic consequences to Obama in a way that even he,
a non-economist can understand, and tell Obama to bang on the table, like FDR did to the Wall Street and Government crooks that their GAME is OVER. It was to be a fair game for all from then on, not just for special interest. He failed that.

(2) As soon as he knew about how Lehman had cooked the books and lied to the public for a long time about its financial solvency, Geithner should have told Paulson that he has to take Lehman to task, and not just help Lehman to cover up. Trying to cover up and sell it to Barclays indicate that Paulson and Geithner were rotten to the core. THEY SHOULD HAVE IMMEDIATELY ASKED THE SEC TO ARREST LEHMAN AND ITS ACCOUNTANTS, & MADE SURE THAT THEY COULD NOT USE LEGAL LOOPHOLES TO COVER THEIR TRAILS. IF THAT HAD HAPPENED, THEN THE INTERNATIONAL INVESTORS WOULD NOT HAVE LOST CONFIDENCE IN THE AMERICAN GOVERNMENT AND WALL STREET TO PATROL ITSELF, AND WOULD NOT HAVE SOLD OFF, CAUSING THE WALL STREET CRASH, AND THEN THE HOUSING MARKET CRASH, from which we have not recovered.

AGREGIOUSLY, SHOCKINGLY, Geithner used his observation that everybody was ducking, taking shelter to avoid financial disasters falling upon themselves or their companies, at the expense of the world at large. THAT ITSELF WARRANTS HIS IMPEACHMENT. YET, GEITHNER TALKED AS IF THE FACT THAT THESE PEOPLE WERE DUCKING before the public learnt about Lehman, was sufficient reason to be “kind” to these people and help them lie, and get off the hook! The fact that they are ducking means that they were guilty and were hiding the truth from the American people, to whom the Treasury Secretary should be primarily responsible for.

The only reason Geithner is till Treasury Secretary is because he spins the most unethical choice of action, the sellout of the American people as the choice that everybody must accept, while doing everything to selectively help those with special interest, special connections.

I THINK HIS PERFORMANCE RANKS WITH HILARY CLINTON’S EMPHATIC INSISTENCE THAT THE LEWINSKY AFFAIR WAS THE RESULT OF A CONSPIRACY FABRICATED BY THE RIGHT WING, as the most egregious false statements said with absolute conviction.

THE DIFFERENCE IS: Wives primary role is not to be an expert about the husbands’ extramarital affairs. Husbands make certain the wives are the last to know. Treasury Secretaries’ jobs, (in which both Geithner and Paulson failed) FUNDAMENTALLY include the skill and ability to step up the bar, to stamp out ILLEGAL, UNETHICAL “DUCKING” BY THE SPECIAL INTEREST GROUP WHO CAUSED THE FINANCIAL CRISIS, AT THE EXPENSE OF ORDINARY INVESTORS AND CITIZENS.

IMPEACH GEITHNER AND ARREST PAULSON FOR UNETHICALLY SELLING AMERICA OUT.

Jul 25, 2012 2:24pm EDT  --  Report as abuse
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