Appearing before the House financial services committee, Geithner once again blamed British regulators for failing to stop the manipulation of Libor interest rates. Geithner was head of the New York Federal Reserve at the time that Barclays and other banks are alleged to have manipulated the key set of interest rates used to set more than $800tn in securities and loans worldwide.
The treasury secretary told the committee that he had become concerned about possible Libor manipulation in the spring of 2008. As he had previously said, Geithner contacted the Bank of England and suggested a series of reforms. He also shared his concerns with US regulators including the treasury, the Securities and Exchange Commission and the CFTC.
Geithner has come under increasing criticism as the Libor scandal has grown in the US. Cities including Baltimore have launched legal actions against Barclays, JP Morgan and others claiming their investments were hit by the manipulation of Libor. Libor was used to set the rate on the US-government's $85bn bailout of insurance giant AIG.
Geithner told the committee the treasury was now investigating whether it, too, had lost out as a result of the Libor scandal. "I do not know whether we were disadvantaged by this practice," he said.
New Jersey congressman Scott Garrett accused Geithner of hiding behind "finger pointing".
"You can not have your cake and eat it," he said.
Garrett's Republican colleagues quizzed Geithner about why, if this appeared to be a potential act of fraud, he had not informed the US justice department. Randy Neugebauer said it was "puzzling" that Geithner's concerns didn't rise to the level of a criminal investigation.
Neugebauer has written to the New York Fed seeking details of its communications with the Bank of England and others over the scandal. "It wasn't just a British problem," he said. "There are domestic US banks that are a part of that."
"We did not view this as some small isolated thing." said Geithner. "We pushed them [British regulators] to fix it, to reform it, fix is a bad word in this context," said Geithner. "We don't think they went far enough."
Geithner told the committee that press reports and the New York Fed's own investigations had convinced him that there was a risk that Libor was designed to give "not just the incentive to under report but also the opportunity".
"I personally raised this with the governor of the Bank of England," said Geithner. "We felt, and I still believe this, that it was really going to be on them to fix this."
He said that the New York Fed had made a series of recommendations to British authorities. "If more of those had been adopted you would have limited the risk going forward," he said.
Most Democrat members on the committee rallied to Geithner's defence. Congressman Brad Sherman, said there had been attempt to "blame America first" for a problem with a British bank and a British regulator.
Libor dominated the hearing but it had been called to discuss the annual report of the financial stability oversight council, set up after the financial crisis.
Geithner told the committee there had been significant improvements in the US economy since the council last reported but warned of problems ahead.
"The European crisis presents the biggest risk to our economy," Geithner said. European leaders had moved to curtail the crisis, he said, but added: "For these reforms to work, they need to be complemented by actions in the near term to restore financial stability and support economic growth, including strengthening the stability of the banking systems and bringing sovereign borrowing rates down in the countries implementing reforms."
The US economy is still growing but growth has slowed over the last two quarters, Geithner said. He warned that arguments over the so-called "fiscal cliff" – the year end expiration of tax cuts brought in by president George Bush and planned implementation of draconian spending cuts – could further exacerbate the situation.
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