Geithner on defense in Libor scandal questioning

@CNNMoney July 25, 2012: 1:02 PM ET
Treasury Secretary Tim Geithner defended his role at the New York Fed, which got early reports of Libor rigging.

Treasury Secretary Tim Geithner defended his role at the New York Fed, which got early reports of Libor rigging.

WASHINGTON (CNNMoney) -- Treasury Secretary Tim Geithner on Wednesday defended his role, as New York Federal Reserve president in 2008, in dealing with early warnings that a key financial benchmark was being rigged.

Geithner told the House Financial Services Committee that he briefed U.S. regulators and the White House when Barclays bankers told the New York Fed that the bank was submitting false estimates to determine Libor. He said he also briefed British authorities.

"I felt we did the important and fully appropriate thing," Geithner told lawmakers. "We brought our concerns to (British regulators') attention. We felt it was really going to be on them to take responsibility for fixing this."

The Libor rate -- currently used to calculate trillions of dollars in consumer and business loans around the world -- has been in the spotlight since revelations that Barclays (BCS) manipulated Libor to benefit trades and its own bottom line.

Libor is used to set interest rates on mortgages, loans and swaps contracts worldwide.

Barclays agreed last month to pay about $450 million to settle manipulation charges. The scandal has weakened trust that banks are setting rates on loans fairly and honestly.

Geithner pointed out that the British Banking Association, the group charged with overseeing the process of setting Libor, did undertake a few reforms in response to his suggestions.

But, he added, "obviously, we don't think they went far enough."

Financial Services chairman Spencer Bachus, an Alabama Republican, grilled Geithner about why the New York Fed, under his watch, used Libor to help set bailout terms during the financial crisis -- even though the bank knew it was being manipulated.

"We were in the position of investors all around the world," Geithner said. "And we did what everybody else did, which is to use the best rate available at the time."

He added that investigators are looking back on the use of Libor during the financial crisis and "to what extent the rate was moved up, or moved down, or actually affected in any way." To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.80%3.88%
15 yr fixed3.20%3.23%
5/1 ARM3.84%3.88%
30 yr refi3.82%3.93%
15 yr refi3.20%3.23%
Rate data provided
View rates in your area
Find personalized rates:
Economic Calendar
Latest ReportNext Update
Home pricesAug 28
Consumer confidenceAug 28
GDPAug 29
Manufacturing (ISM)Sept 4
JobsSept 7
Inflation (CPI)Sept 14
Retail sales Sept 14
  • -->

    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.