Geithner points to London over Libor scandal

Treasury Secretary Timothy Geithner sought to deflect criticism of his handling of the Libor banking scandal Wednesday, directing US lawmakers' scorn toward London regulators. Facing a sometimes fierce interrogation from a House of Representatives committee, Geithner insisted he acted properly when he found out in 2008 that the key inter-bank interest rate was being manipulated. "I believe we did the necessary appropriate things," said Geithner, who was at the time the president of the New York branch of the Federal Reserve. The Treasury chief said he sent a detailed list of recommendations on reforming the rate -- which underpins rates on everything from mortgages to credit cards -- to Bank of England governor Mervyn King. "We brought those concerns to their attention, and we thought, and I still believe, that it was really going to be on them to take responsibility for fixing this." That argument appeared to hold little truck with Republicans, particularly New Jersey congressman Scott Garrett. "You are the secretary of the Treasury of the United States of America! You had the authority for four years tocome to us, lay out the problem and lay out the solutions and for four years you didn't do anything about it," he said angrily. Geithner's response was terse: "In my view the regulators did the necessary, appropriate thing in this context and they started that process very early." Emails, phone transcripts and internal reports recently released showed the New York Fed under Geithner was explicitly told that banks were misstating their input to the Libor in June 2008. In response Geithner suggested the Bank of England (BoE) expand the number of banks that are on the Libor-setting panel and make the process less opaque. Libor rates for US dollars are currently set by 18 banks -- including three from the United States -- which state how much they expect to be charged to borrow over a range of time periods. Some of the highest and lowest estimates are disregarded and an average is found. That rate then is used as the base for interest rates on home loans, student loans and a range of other consumer products. The Fed and Geithner have been accused of putting Libor abuse on the back burner because in 2008 Wall Street was in the throes of the financial crisis and of failing to bring banks to heel. Two days after Geithner's letter to King, the BoE chief replied that Geithner's recommendations "seem sensible" and would be provided to the British Bankers' Association, which manages the daily Libor setting process, for consideration. But it appears little changed in the system. Geithner said that US regulators were also notified. "We took a very careful look at these concerns, we thought those concerns were justified and we took the initiative to take those concerns to the broader US regulatory community." That disclosure appears to have resulted in a recent $452 million fine for Barclays, levied by US and British regulators.