Former U.S. Federal Reserve official Timothy F. Geithner questioned the integrity of the benchmark used to set key interest rates and alerted top British officials about his concerns in 2008, the New York Times reported.
In an e-mail to British counterparts on the rate that is set in London, Geithner, then president of the New York Fed district bank, set out potential changes to the system, suggesting U.K. authorities strengthen governance and establish a credible reporting procedure and eliminate incentive to misreport, the newspaper reported, citing documents it obtained. Geithner, 50, has been President Barack Obama’s Treasury secretary since January 2009.
Lawmakers in Washington are seeking information on the scandal that prompted Barclays Chief Executive Officer Robert Diamond to quit last week after the U.K.’s second-biggest lender was fined a record 290 million pounds ($448 million) for attempting to rig interest rates. At least a dozen banks are being investigated for manipulating the so-called Libor.
Libor is calculated from a daily survey carried out for the British Bankers Association in London, in which the world’s biggest lenders are asked the rate they’re charged to borrow over a variety of short-term maturities in currencies including dollars, euros and yen. Banks are accused of low-balling submissions for the benchmark during the financial crisis.
The Senate Banking Committee also plans to question Geithner and Fed Chairman Ben S. Bernanke on the scandal at regularly scheduled hearings this month. Committee Chairman Tim Johnson, a South Dakota Democrat, said July 10 he is “concerned by the growing allegations of potential widespread manipulation of Libor and similar interbank rates.”