LONDON Nov 14 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
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
Geithner did raise alarm bells in Britain, where the rate is
set, but the senators were concerned he did not inform the
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
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.
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.