As I discussed the other day, the LIBOR scandal is prompting calls for new bank regulations such as a neo-Glass Steagall Act. Unlike most financial scandals, however, the LIBOR scandal is proving something of an embarrassment for the big government crowd. It's becoming increasingly clear that both USA and UK regulators were aware that the LIBOR numbers were being fudged and, in some cases, complicit in authorizing fudging. HuffPo, for examples, reports that:
The New York Federal Reserve on Friday released documents showing it knew banks were manipulating a key interest rate more than four years ago.
Can you guess who was the boss at the NY Fed back then? If you said Obama Treasury Secretary Timothy Geithner, you guessed right.
The UK Independent is reporting that:
The New York Fed said that, immediately after the call, Ms Ravazzolo informed her superiors of the information, who then passed on her concerns to Tim Geithner, who was head of the New York Fed at the time. Mr Geithner investigated and drew up a six-point proposal for ensuring the integrity of Libor which he presented to the British Bankers Association, which is responsible for producing the Libor rate daily.
Mr Geithner, who is now US Treasury Secretary, also forwarded the six-point plan to the Governor of the Bank of England, Sir Mervyn King. The Bank pointed out last night that there was no evidence in the Geithner letter of banks actually making false submissions – although then note did allude to "incentives to misreport".
It was unclear last night whether Mr Geithner informed Sir Mervyn about the testimony of the Barclays employee who said that the bank was being dishonest in its submissions.
Geithner's ability to remain a credible regulator of the banking industry is thus coming under serious question. IMHO, his head needs to roll (figuratively, of course). Heck, even hard left-liberal blogs like Crooks and Liars are blasting Geithner:
Let's be clear: As far back as 2007, banks were charging you more money on just about everything because they were using a fraudulent Libor rate - and Tim Geithner knew it. His response? To write a memo suggesting ways they should fix it. To hell with the little people who got robbed, right, Tim?
So the next time Obama bashes Wall Street bankers, somebody needs to tell him to clean his own house first.