NY Fed, Geithner Knew about Economic Trouble in 2007

The New York Federal Reserve and its then-chairman Timothy Geithner were informed as early as 2007 about problems pertaining to Libor, a critical interest rate that sets the tone in the global marketplace, according to the Washington Post:

On Tuesday, the New York Fed said that it had received "occasional anecdotal reports from Barclays of problems with Libor" in late 2007, as the financial crisis was starting.

The disclosure came as Washington policymakers began to increase their scrutiny of the role of regulators in the scandal surrounding the London interbank offered rate, or Libor.

Every day, major banks around the world submit their borrowing costs, which are then used to compute an interbank rate. Barclays was accused of concealing its borrowing costs — in an effort to drive up profits and send signals that the bank was healthier than it might have been.

Barclays’ former CEO Robert Diamond testified before the British Parliament last week that his bank had "repeatedly" warned both U.S. and U.K. regulators of problems with Libor. The regulator Barclays deals with in the United States is the Federal Reserve Bank of New York. In 2007, the New York fed was run by Geithner, the current Secretary of the Treasury.

Diamond said that his bank had alerted the New York Fed to issues with Libor at least 12 times. …

Geithner personally participated in several conversations with Barclays executives, according to his New York Fed calendar, later posted on the Web site of the New York Times. It wasn’t clear if these meetings focused on the Libor issues now coming to light.

The House Financial Services Committee has sent the New York Fed a letter asking about its handling of the issue. … On Tuesday, the Senate Banking Committee also said it would begin to hold meetings with individuals involved with the matter to learn more about the allegations and related enforcement actions.

The revelations were reported in an article ran on page A10 of the Post.