Geithner Tried to Curb Rate Rigging in 2008
By BEN PROTESS, NYT
When Timothy F. Geithner ran the Federal Reserve Bank of New York, he acknowledged fundamental problems with the process for setting key interest rates in the midst of the 2008 financial crisis, according to documents provided to The New York Times.
Mr. Geithner, who is now the United States Treasury secretary, questioned the integrity of the benchmark as reports surfaced that Barclays and other big banks were misrepresenting the rates. In 2008, Barclays had several conversations with New York Fed officials about the matter.
Mr. Geithner then reached out to top British authorities to discuss issues with the interest rate, which is set in London. In an e-mail to his counterparts, he outlined reforms to the system, suggesting that British authorities "strengthen governance and establish a credible reporting procedure" and "eliminate incentive to misreport," according to the documents.
But the warnings came too late, and Barclays continued the illegal activity.
For years, Barclays reported false rates in an effort to bolster its profit and deflect concerns about the British bank's health. Last month, the bank agreed to pay $450 million to American and British authorities to settle claims that it had manipulated key benchmarks, including the London interbank offered rate, or Libor.
(More here.)
When Timothy F. Geithner ran the Federal Reserve Bank of New York, he acknowledged fundamental problems with the process for setting key interest rates in the midst of the 2008 financial crisis, according to documents provided to The New York Times.
Mr. Geithner, who is now the United States Treasury secretary, questioned the integrity of the benchmark as reports surfaced that Barclays and other big banks were misrepresenting the rates. In 2008, Barclays had several conversations with New York Fed officials about the matter.
Mr. Geithner then reached out to top British authorities to discuss issues with the interest rate, which is set in London. In an e-mail to his counterparts, he outlined reforms to the system, suggesting that British authorities "strengthen governance and establish a credible reporting procedure" and "eliminate incentive to misreport," according to the documents.
But the warnings came too late, and Barclays continued the illegal activity.
For years, Barclays reported false rates in an effort to bolster its profit and deflect concerns about the British bank's health. Last month, the bank agreed to pay $450 million to American and British authorities to settle claims that it had manipulated key benchmarks, including the London interbank offered rate, or Libor.
(More here.)
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