(From THE WALL STREET JOURNAL)
By Damian Paletta
WASHINGTON -- A Federal Reserve official said Wednesday the central
bank will release documents showing the Federal Reserve Bank of New
York acted swiftly during the financial crisis to identify problems
with a key interest rate and suggest changes.
"Documents to be released Friday will show the New York Fed took
prompt action four years ago to highlight problems with [the London
interbank offered rate] and press for reform," the official said.
The Fed plans to release the documents in response to lawmakers'
questions about the central bank's potential knowledge of the alleged
manipulation of Libor by banks in 2007 and 2008.
The large British bank Barclays PLC last month agreed to pay about
$453 million to settle a long-running probe by U.S. and U.K.
regulators into allegations that traders at the bank sought to
manipulate interbank lending rates. A number of other U.S. and U.K.
banks are under scrutiny as part of a broader probe.
Some members of Congress in recent days have raised questions over
whether the New York Fed knew that certain banks were manipulating
Libor and whether it should have done more to intervene.
The top Republican on the Senate Banking Committee said Wednesday that
Congress must demand answers from the New York Fed and its former
president, Timothy Geithner, about their knowledge of any potential
rate manipulation.
Sen. Richard Shelby (R., Ala.), in an interview with The Wall Street
Journal, noted reports of discussions between New York Fed officials
and Barclays about Libor that have come out as part of the
investigation into Barclays. Mr. Geithner was president of the New
York Fed from 2003 until he became Treasury secretary in January 2009.
"There was a number of conversations," Mr. Shelby said, referring to
the discussions between Barclays and the New York Fed about Libor. "We
need to know what they were. Was the bank, headed by Geithner, asleep?
Were they complicit? Did they look the other way? Heck, we don't
know."
Mr. Shelby's statements echo those of other lawmakers suggesting that
Mr. Geithner and Federal Reserve Chairman Ben Bernanke could face a
bipartisan grilling in the next two weeks when they appear before
House and Senate panels for previously scheduled hearings on other
matters. Mr. Shelby said Congress should consider holding additional
hearings on the Libor issue in the near future.
Barclays is engulfed in a broad rate-fixing scandal connected to
Libor, and three top officials at the bank have resigned. Former
Barclays chief Robert Diamond told the British Parliament the bank
"repeatedly" raised concerns with the New York Fed about the financial
crisis's impact on Libor, and the New York Fed has said it started
receiving reports about the problem in 2007. The New York Fed said
earlier in the week that it "shared our analysis and suggestions for
reform of Libor with the relevant authorities in the U.K." It has not
said, though, what suggestions it made or how hard it pushed for
changes.
(END) Dow Jones Newswires
July 11, 2012 21:11 ET (01:11 GMT)
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