“As much as $800 trillion in financial products are pegged to LIBOR, so any manipulation of this rate is of serious concern!”-U.S. Representative Randy Neugebauer, House Financial Services Subcommittee on Oversight and Investigations
14 July 2012, current United States Secretary of the Treasury, Timothy Franz Geithner, knew of illegal interest and currency manipulation by LIBOR while he was chairman of the Federal Reserve Bank of New York (a privately run bank).
According to recent reports, in 2008 a Barclays employee told Geitner “…we know that we’re not posting um, an honest…” rate. The unnamed employee then went on to explain that Barclays just wanted to “…fit in with the rest of the crowd.”
An interesting statement since Barclays is actually an international banking leader!
“I wish I could say I’m shocked, because it is shocking. But regulators have not been particularly effective or aggressive in the past two decades of finance.”-Frank Partnoy, University of San Diego School of Law
The latest reports say officials with the U.S. Federal Reserve Bank knew of such rate fixing back in 2007: “In the context of our market monitoring following the onset of the financial crisis in late 2007, involving thousands of calls and e-mails with market participants over a period of many months, we received occasional anecdotal reports from Barclays of problems with LIBOR.”-New York Federal Reserve Bank statement
In April 2008, a Barclays employee told the New York Federal Reserve: “…where I would be able to borrow without question it would be higher than the rate that I’m actually putting in.”
Geitner notified government officials, including the U.S. Department of the Treasury (then run by Hank Merritt “Hank” Paulson Jr under President George Bush Jr). Seemingly no one was concerned, because nothing was done to stop it.
On 13 July 2012, the Bank of England (BoE) admitted to getting a letter from Geitner, back in June 2008. The letter kindly asks the British controlled LIBOR to “…eliminate incentive to misreport.”
BoE responded simply by saying Geitner’s request “seem sensible”.
Since last year, the number of Too Big to Fail banks being investigated has grown to several dozen! The scandal involves banks in North America, Europe and Japan (the regional members of the Trilateral Commission).