Geithner comes under fire for lack of Libor action
WASHINGTON (MarketWatch) -- Treasury Secretary Timothy Geithner came under fire Wednesday by Congress for not taking strong enough action in the scandal involving U.K. bank
At issue is what the New York Fed did after a Barclays employee told the regional bank in April 2008 that the bank was submitting false reports to the Libor-setting panel in London to try to send a signal that it was healthy. Read earlier story on what New York Fed knew.
Rep. Randy Neugebauer, a Republican from Texas, said he thought the New York Fed had an obligation to make a criminal referral to the Justice Department once it learned that Barclays (BCS) (BARC) was committing fraud.
"It is a little puzzling to me" why such a referral was not made, Neugebauer told Geithner at a hearing of the House Financial Services Committee.
Geithner said he was not told of the Barclays' employee's admission.
"I do not believe I was made aware of that specific conversation," Geithner said.
Geithner said he did not discuss the Libor issue with anyone at the Justice Department. He said he did not know if any other New York Fed official reached out to federal prosecutors.
Geithner defended the New York Fed's actions in the Libor case, saying he alerted top regulators in Washington. Geithner said he acted after receiving a range of general reports that banks were actually filing false Libor reports.
"At the New York Fed…I believe we did [the] necessary appropriate thing very early in the process," Geithner said
"We…did the appropriate thing at an early stage and went and briefed the relevant authorities with enforcement authority and responsibility for fraud and manipulation so they would have ability to choose whether to act on those concerns," Geithner said.
A story in the Washington Post on Wednesday, quoting two unidentified people with knowledge of the matter, said that regulators never heard an appeal from the New York Fed to investigate possible wrongdoing over Libor.
Officials at the Commodity Futures Trading Commission and the Justice Department worked largely without the Fed's help to build a case against Barclays, according to the report.
In testimony to a separate Senate panel on Wednesday, Commodity Futures Trading Commission Chairman Gary Gensler said his agency launched its Libor probe after media reports raised questions about the integrity of the index.
Barclays ultimately paid $450 million to settle CFTC and British charges that it provided false submission to the Libor setting panel.
Bank of England Governor Mervyn King said that the New York Fed did not give him any specific evidence of wrongdoing with regards to Libor.
The questions about Libor dominated the House Financial Services hearing.
Rep. Scott Garrett, a Republican from New Jersey, criticized Geithner for never telling Congress about his concerns with Libor.
"You have been before this committee countless numbers of times since 2008," Garrett said.
"Never once did you say this is a huge problem or a medium-size problem."