Econintersect: A bombshell report from Reuters today (10 July 2012) suggests the Federal Reserve Bank of New York (NY Fed) knew of the LIBOR (London Interbank Overnight Rate) manipulation scandal five years ago. Here is what Reuters said today:
The Federal Reserve Bank of New York may have known as early as August 2007 that the setting of global benchmark interest rates was flawed. Following an inquiry with British banking group Barclays Plc in the spring of 2008, it shared proposals for reform of the system with British authorities.
The Reuters article gives many details of the criticism now leveled at the Fed for not taking firmer action.
Reuters quotes Stanford University professor Darrell Duffie:
“It appears that some regulators, at least at the New York Fed, indeed knew there was a problem at that time. New York Fed staff have subsequently presented some very good research on the likely level of distortions in Libor reporting,” Duffie said. “I am surprised, however, that the various regulators in the U.S. and UK took this long to identify and act on the misbehavior.”
Another gem from Reuters:
On Monday, the Bank of England’s Tucker called the issue of banks improperly submitting rates a “cesspit.”
Paul Tucker, Deputy Governor of the BOE (Bank of England) and a leading candidate to become the next governor, has been under attack for possible implication in the rate fixing scandal (GEI News). Yesterday he faced extensive grilling from Parliament (Daily Beast).
Sources:
- Insight: Fed knew of Libor issue in 2007-08, proposed reforms (Carrick Mollenkamp, Reuters, 10 July 2012)
- Did Bank of England Have a Hand in Libor Fixing? (GEI News, 04 July 2012)
- Paul Tucker Testimony: Bank of England Pushes Back (Martin Zeitlin, The Daily Beast, 09 July 2012)
