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Intro: "Federal Reserve chairman Ben Bernanke is set to be quizzed about the failure of US regulators to stop bankers manipulating interest rates as the fallout of the Barclays Bank scandal spreads to the US."

Ben Bernanke will be quizzed about his response to a scandal that has so far led to the ousting of Barclays' top three executives. (photo: Alex Wong/Getty Images)
Ben Bernanke will be quizzed about his response to a scandal that has so far led to the ousting of Barclays' top three executives. (photo: Alex Wong/Getty Images)



Ben Bernanke to Face Senate Questioning Over Barclays Fallout

By Dominic Rushe, Guardian UK

11 July 12

 

ederal Reserve chairman Ben Bernanke is set to be quizzed about the failure of US regulators to stop bankers manipulating interest rates as the fallout of the Barclays Bank scandal spreads to the US.

Senator Tim Johnson, the chairman of the banking committee, said Tuesday that Bernanke should be prepared to discuss the possible illegal manipulation of the London Interbank Offered Rate, or Libor, by banks in Europe, Japan and the US when he appears before the panel later this month. Johnson said treasury secretary Timothy Geithner would also face senators' questions on the scandal at a separate hearing.

"I am concerned by the growing allegations of potential widespread manipulation of Libor and similar interbank rates by some financial firms," said Johnson. "At my direction, the committee staff has begun to schedule bipartisan briefings with relevant parties to learn more about these allegations and related enforcement actions."

US regulators are coming under fire after revelations that they may have known about flaws in setting interest rates as early as 2007 when the Federal Reserve bank of New York shared its concerns about possible manipulation of Libor with UK regulators.

Libor rates are ultimately used to set rates for anything from car loans to mortgages and other securities in a market valued at $550tn. Regulators are investigating whether bankers colluded to manipulate Libor in order to make profits or avoided losses by wagering on the direction of interest rates.

Barclays last month agreed to pay $453m to British and US authorities to settle allegations that it manipulated Libor. More than a dozen other banks including Citigroup, HSBC and JP Morgan Chase are being investigated for their roles in setting Libor rates.

The scandal has so far led to the ousting of Barclays' top three executives and caused a political firestorm in the UK.

New York Fed officials quizzed executives at Barclays in 2007. The bank has considerable operations in the US and bought the core assets of bankrupt Lehman Brothers bank in 2008.

Geithner, former New York Fed president, even held a meeting on April 28 2008 titled "Fixing Libor" that was attended by other Fed officials.

In a statement a New York Fed spokesman said: "In the spring of 2008, following the failure of Bear Stearns and shortly before the first media report on the subject, we made further inquiry of Barclays as to how Libor submissions were being conducted. We subsequently shared our analysis and suggestions for reform of Libor with the relevant authorities in the UK."

Darrell Duffie, a Stanford University finance professor and Libor expert, said he expected more banks to be fined as the full extent of the scandal emerges. "At present we just don't know whether Barclays was fined first because it was the most egregious case or because it was the most co-operative," he said.

Duffie said he expected regulators on both sides of the Atlantic to face mounting criticism. "Collectively the regulatory community didn't push as hard as it should have on this issue even though they have clearly been following it from the beginning," he said.

 

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+9 # bluepilgrim 2012-07-11 08:12
LIBOR rates are set by tossing out what the top and bottom 25% of the reporting banks say and averaging the middle 50%, so no one bank or even a few banks, can make much difference: it takes 'collusion' by most of them.

Bernanke should have his beard and mustache shaved off and glued to the middle of his nose (making him more identifiable as a monstrous beast). He, Geithner, and the others involved in the financial and economic mess of the government are into this to their necks and have been fudging and fiddling from the start, and this has long been talked about. That's why they got the positions they did -- to keep the scams going.

It's doubtful if this will go anywhere, considering how totally corrupt the entire governmental system is -- throughout the world.

Nice cartoon at
http://www.socialistworker.co.uk/art.php?id=29066
or
http://www.socialistworker.co.uk/chimage.php?image=2012/2311/tim_toon.jpg
 
 
+12 # AndreM5 2012-07-11 09:07
SCANDAL NOT! Crime it is. Until the heads of CEOs and regulators roll, there will be no "confidence" in the financial world. Perhaps there never should have been any confidence in the first place and perhaps there never should be again. A financial system based so heavily on "confidence" and "trust" is doomed to become corrupt anyway. Nationalize the Fed.
 
 
+3 # John Locke 2012-07-11 11:45
AndreM5: Yes the Banks MUST be Nationalized in the best interest of the country.

These hearings are a joke, they actually go no place and there is never any prosecutions...

it's time we started making real demands and follow through in numbers!

With all the publicity about how corrupt these banks are, will people now stand up and fight these corrupt institutions or will we all just sit back and complain?
 
 
+1 # Michael_K 2012-07-11 13:22
I hope it will be televised. I wanna see Bennie doing the high speed tap dance. Is Geithner also going to be quizzed? Because he was complicit at the NY Fed, studiously not noticing the NY/London discrepancies.
 
 
+4 # DPM 2012-07-11 13:24
The regulators are "in bed" with the criminals they are supposed to be watching. After all, those banks will be their next job posting. And, didn't they come from the banks in the first place? "Around and around she goes and where she stops...everyon e knows!"
 
 
+3 # tomo 2012-07-11 17:42
The idea of being shocked, perfectly shocked, that American financiers and regulators may have caught wind of the manipulation of Libor rates and done nothing about it, and the idea of calling in Bernanke and Geithner to get a handle on this strikes me as quite ludicrous. The whole purpose of appointing Geithner and re-appointing Bernanke was to let the games continue to go along smoothly.

I'm surprised we haven't taken the position that the real criminal was whoever let the news leak out. Why not declare that whoever is telling the truth about this matter is a traitor to our friends the Brits, and is likewise a traitor to the Brits' friends on Wall Street? By golly, that person is a gigantic national security risk and should be scooped up off the streets and dumped into Guantanamo without so much as bothering with an indictment.
 
 
0 # futhark 2012-07-11 21:54
The good news is that the Federal Reserve Transparency Act (aka "Audit the Fed"), introduced by Rep.Ron Paul and cosponsored by Reps. Lynn Woolsey, Dennis Kucinich, and Alan Grayson, is making its way through the House of Representatives . I anticipate that the audit will be the accounting equivalent of the dissection of a putrifying, maggot-infested corpse.
 
 
0 # AndreM5 2012-07-12 07:00
"Fat" and "chance" seem to be appropriate here.
 
 
0 # AndreM5 2012-07-12 07:00
You do know that Grayson is not actually a Congressman now?
 
 
+2 # lark3650 2012-07-12 01:58
As Andrew Jackson said about the Bankers: "You are a den of vipers and thieves..."
 
 
+1 # Buddha 2012-07-12 08:21
Does anybody doubt it will be anything other than another dog-and-pony show, just like when Jamie Dimon testified a couple months ago? I threw up in my mouth at the overt corruption exhibited in our elected representatives as they fawned over Dimon, I expect I'll be tasting more bile with this hearing too...
 
 
0 # fcvnyc 2012-07-12 08:40
The executives of the involved banks should not only be given jail time besides paying personal fines but regulators should start considering overhauling the monetary, financial, economic and commercial systems and its present world disorder that enrich the few, impoverish the many and imperil the planet. This can be done by the pursuit of integrated global governance system, a proposal for which is made in the recently published The Tierra Solution: Resolving the Climate Crisis through Monetary Transformation. This bold and daring proposal, called “visionary and highly practical” by Hazel Henderson, lays out a sustainability philosophy which leads to a win-win-win situation for the climate crisis, the dysfunctional international monetary system, and unsustainable development in the global North and South.
 

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