LONDON Nov 14 (Reuters) - Two Republican senators said on Wednesday they would block the confirmation of the head of a new U.S. regulatory office because they are unhappy about the way Treasury Secretary Timothy Geithner has handled the Libor rate-rigging scandal.
Republican Senators Charles Grassley and Mark Kirk said they would hold up a vote to confirm Richard Berner, a former Morgan Stanley economist who was appointed by President Barack Obama late last year to head the Office of Financial Research.
The Office of Financial Research (OFR), a new regulatory body created by the 2010 Dodd-Frank Wall Street reform law, is housed within the Treasury Department.
It has broad powers to collect and analyze data from financial companies to help prevent the next financial crisis.
Republicans generally have been critical of the OFR, saying its powers to seek firms' proprietary information are too far-reaching and that it could become a target for hackers.
In this case, however, Grassley and Kirk said they were holding up Berner's nomination not because of concerns about the OFR, but because they are unhappy that Geithner has not responded to their inquiry about banks' alleged manipulation of the Libor global rate benchmark.
"During your tenure as Treasury secretary, nothing has been done to diminish use of this flawed index in U.S. financial markets," the two said in a letter.
A Treasury spokeswoman declined comment.
Earlier this year, Kirk and Grassley wrote a letter to Geithner that criticized him for failing to wean U.S. firms off Libor after evidence emerged that it was being rigged by the big banks during his tenure as the head of the New York Federal Reserve.
Geithner did raise alarm bells in Britain, where the rate is set, but the senators were concerned he did not inform the public.
Geithner has testified before Congress that the New York Fed did not encourage banks to misrepresent their borrowing costs when setting Libor. He emphasized that he made recommendations to fix Libor to authorities in Britain.
Grassley and Kirk also criticized Geithner for not lobbying for a U.S. benchmark. His failure to do so had contributed to "litigation that threatens to clog our courts with multibillion-dollar class action lawsuits," they said.
British bank Barclays was fined $450 million by U.S and UK regulators in June for manipulating Libor, and it is the only bank so far to have settled.
More than a dozen banks are under investigation by regulators for suspected rigging of the interbank rates, used to price trillions of dollars worth of financial products, including home loans and credit cards.
"Taxpayers need to know there's a cop on the beat at the Treasury Department, making sure the interest rates they pay on everything from home loans to retirement investments aren't rigged," Grassley said in a statement Wednesday.
"If the attitude of the Treasury secretary is that it isn't his responsibility to take action or to tell the public, that's going to harm confidence in our financial system and create a lack of certainty."
He added that Treasury has refused to respond to their letter, which was sent more than six weeks ago.
Grassley and Kirk's objection to Berner's confirmation is significant because all 100 U.S. senators need to unanimously agree that a vote can take place before any nominee can be voted in.
The ongoing Libor probe has raised concerns globally about the need for reforms.
Among those calling for changes is Gary Gensler, who heads the Commodity Futures Trading Commission, the top U.S. derivatives watchdog.
Gensler wants the benchmark to be based on actual trades on the interbank lending market, rather than on an estimate of the rate at which a panel of London-based banks think they can borrow funds, as is currently the case.