“The economy is the main event but the LIBOR scandal will be on the under-card when Fed Chairman Ben Bernanke testifies before Congress today and tomorrow.
At issue is what the Fed, and other bank regulators, knew about manipulation of the key lending rate and whether they condoned banks giving low-ball estimates of LIBOR in order to make themselves look healthier during the crisis of 2008.
Bernanke is likely to face some inquires about this issue, but the U.S. regulator most questions are being asked about is Treasury Secretary Tim Geithner, who is set to testify about the matter before the House Financial Services committee next week.
In 2008, while President of the NY Fed, Geithner sent a memo to British regulators to raise concerns about potential manipulation of LIBOR, as has been widely reported and confirmed Friday by the NY Fed.
The question now is why Geithner didn’t do more to follow up on that memo, considering the central role LIBOR plays in the financial markets. Literally hundreds of trillions of dollars of financial instruments — including complex derivatives but also basic consumer loans are tied to LIBOR, technically the London Interbank Offered Rate.”
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