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New York Fed Says It Knew of Barclays Libor ‘Problems’

New York Federal Reserve Bank of New York Dudley
William C. Dudley, president and chief executive officer of the Federal Reserve Bank of New York. Photographer: Scott Eells/Bloomberg

The Federal Reserve Bank of New York was aware of potential issues involving Barclays Plc and the London interbank offered rate after the financial crisis began in 2007, according to a statement from the district bank.

“In the context of our market monitoring following the onset of the financial crisis in late 2007, involving thousands of calls and e-mails with market participants over a period of many months, we received occasional anecdotal reports from Barclays of problems with Libor,” New York Fed spokeswoman Andrea Priest said in an e-mailed statement.

“In the spring of 2008, following the failure of Bear Stearns and shortly before the first media report on the subject, we made further inquiry of Barclays as to how Libor submissions were being conducted,” the statement said. “We subsequently shared our analysis and suggestions for reform of Libor with the relevant authorities in the U.K.”

Representative Randy Neugebauer, a Texas Republican who serves on the House Financial Services committee, sent a letter to New York Fed President William C. Dudley dated yesterday requesting transcripts of communications between the district bank and Barclays relating to setting interbank offered rates from August 2007 to November 2009. Neugebauer asked for the documents by July 13.

Barclays Chief Executive Officer Robert Diamond quit last week after the U.K.’s second-biggest lender was fined a record 290 million pounds ($450 million) for attempting to rig interest rates.

The Senate Banking Committee has begun to schedule briefings “with relevant parties to learn more about these allegations and related enforcement actions,” Senator Tim Johnson, a South Dakota Democrat who chairs the Senate Banking Committee, said in a statement.

Johnson also said that he is asking Treasury Secretary Timothy F. Geithner and Fed Chairman Ben S. Bernanke to “be prepared to answer Senators’ questions on this matter” at upcoming hearings.

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