Quantcast
Connect with us

Geithner pushed for Libor reform in 2008

Published

on

Sir Mervyn King, governor of the Bank of England, has been put at the centre of the Libor-rigging scandal after a senior US official called on him to reform the interest rate market in 2008.

Timothy Geithner, who was then the president of the Federal Reserve Bank of New York, called for six changes he said would improve the integrity of Libor, the London interbank offered rate which is used around the world to set the rate of borrowing for many households and companies.

ADVERTISEMENT

Geithner, who is now the US treasury secretary, sent his memo in June 2008. The memo, published by the Bank of England on Friday (pdf), shows that the recommendations made by Geithner came before October 2008 when Barclays was found to have lowered its Libor submissions to ensure there was no suggestion that it was in financial difficulty during the banking crisis.

The Bank appeared to pin the blame on the British Bankers’ Association, which compiles Libor. The Bank said on Friday that a review of Libor was launched by the BBA in June 2008 in the light of “concerns about difficulties in setting Libor in the stressed market conditions of late 2007 and 2008”. The governor endorsed Geithner’s recommendations.

“Both the Bank and the Federal Reserve were assured by the BBA that it would take on board the recommendations, either through actions or through questions on which it would consult,” the Bank said.

News of the existence of Geithner’s memo comes ahead of King’s appearance before MPs on the Treasury select committee on Tuesday, when he has been called to talk about financial stability but is expected to also face questions about Libor.

ADVERTISEMENT

His role in the departure of Bob Diamond from Barclays was exposed earlier this week when the chairman, Marcus Agius, told MPs how he had been summoned to see King to learn that regulators no longer had confidence in the chief executive.

One of Geithner recommendations was a call to “eliminate incentive to misreport” the rates, which a £290m fine imposed on Barclays showed had been manipulated by traders since 2005 offering each other bottles of champagne and quips such as “this one is for you big boy”.

Geithner wanted the BBA to collect quotes from banks but randomly select the banks included, rather than striking out the highest and lowest.

ADVERTISEMENT

Geithner’s concerns about Libor have already been revealed. He held a meeting on 28 April 2008 titled Fixing Libor that was attended by other Fed officials.

At a press conference last month, King was asked about Libor and explained that there had been discussions to reform the system in 2008 but “there was very little support at that stage among the markets, among banks and, indeed, among our overseas colleagues to make the change to the system”. He said the Bank was prepared to “take the lead” in any changes needed now.

© Guardian News and Media 2012

ADVERTISEMENT


Report typos and corrections to: [email protected].
READ COMMENTS - JOIN THE DISCUSSION
Continue Reading

Facebook

New ‘Lord of the Rings’ show to start filming in New Zealand`

Published

on

US-based streaming giant Amazon announced Wednesday its big-budget "Lord of the Rings" series will within months start filming in New Zealand, home to Peter Jackson's movies of the fantasy epic.

Amazon is reportedly spending US$1 billion-plus on the series as it seeks to emulate the runaway success enjoyed by "Games of Thrones".

Showrunners J.D. Payne and Patrick McKay said the South Pacific nation offered the "primordial beauty" of Middle Earth, the setting for J.R.R. Tolkien's tales of elves, dwarf and hobbits.

"We needed to find somewhere majestic, with pristine coasts, forests, and mountains, that also is a home to world-class sets, studios, and highly skilled and experienced craftspeople," they said in a statement.

Continue Reading

Breaking Banner

Mitch McConnell crony running for Kentucky AG is ineligible for office: lawsuit

Published

on

On Tuesday, the Lexington Herald-Leader reported that a new lawsuit seeks to remove Daniel Cameron from the ballot as the Kentucky GOP's nominee for state attorney general.

According to the lawsuit, filed by retired union worker and "concerned citizen" Joseph Leon Jackson Sr. in Jefferson Circuit Court, Cameron does not meet the office requirement of having practiced law for eight years — because although he was admitted by the Kentucky Bar Association in 2011, he spent two of the following years clerking for U.S. District Judge Gregory Van Tatenhove.

Continue Reading
 

Breaking Banner

Trump lashes out at Lindsey Graham after he accuses the president of showing ‘weakness’

Published

on

President Donald Trump and Sen. Lindsey Graham, once bitter enemies, have become close allies since the 2016 election as the South Carolina Republican realized it was in his personal interest to cozy up to the White House. But on Tuesday, fractures emerged between the two in public over a key issue for Graham: Iran.

Graham is on the severely hawkish wing of the Republican Party, and he clearly wants a war with Iran. He began a series of tweets Tuesday by praising Vice President Mike Pence’s briefing that day about the recent attack on Saudi oil infrastructure, saying he believes that “such a sophisticated attack could not have occurred without Iran’s blessing and direct involvement.” He called it an “an act of war” and lauded the Trump administration’s “efforts to create a regional coalition, thoroughly brief the Congress on the actions taken, and come up with a plan of action to restore deterrence against an evil regime in Iran.”

Continue Reading
 
 
Help Raw Story Uncover Injustice. Join Raw Story Investigates for $1. Go ad-free.
close-image