General Discussion

Octafish

(55,745 posts) Tue Jul 17, 2012, 06:13 PM Jul 2012

LIBOR Scandal: Why the N.Y. Fed Must Be Investigated (Eliot Spitzer)

If Ian Fleming had heard of Tim Geithner, perhaps Blofeld and Goldfinger would go on to control the planet's entire money supply.

Libor Scandal: Why the N.Y. Fed Must Be Investigated

By Eliot Spitzer
Slate.com
Posted Monday, July 16, 2012, at 10:39 PM ET

EXCERPT...

The New York Federal Reserve knew about Libor games being played by the banks years ago and seems to have done precious little about it—except perhaps send a memo parroting the so-called reform ideas proposed by the banks themselves. Then nothing more. No prosecutions, no inquiries of the banks to see if the illegal behavior had stopped—just a live-and-let-live attitude.

Of course, this was the New York Fed led by Tim Geithner—who testified at his confirmation hearings to be treasury secretary that he had never been a regulator. Huh? As president of the N.Y. Fed, he was the most important regulator out there, and he didn't even know it?

SNIP...

Meanwhile, Hank Greenberg of AIG and John Whitehead of Goldman Sachs--these companies that got bailed out—were on the NY Fed committee that made Tim Geithner their president.

Was there a similar conflict of interest when the New York Fed apparently did nothing adequate about the Libor games? Well, look who was on the board: Dick Fuld of Lehman fame; Sandy Weill of Citibank; Jeff Immelt of GE—the largest beneficiary of the Fed's commercial paper guarantees; and, of course, Jamie Dimon of JPMorgan Chase, whose bank's London derivative trades and Libor involvement make his role on the board even more absurd.

CONTINUED...

http://www.slate.com/blogs/spitzer/2012/07/16/libor_scandal_why_the_new_york_fed_must_be_investigated_.html

Unlike Spitzer, some people have all the luck. Must be that Geithner, like Blofeld's cat, has nine incarnations at the ready.

9 replies

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Highlight:

LIBOR Scandal: Why the N.Y. Fed Must Be Investigated (Eliot Spitzer) (Original Post) Octafish Jul 2012 OP

Are the Gate Keepers corrupt or inept? xchrom Jul 2012 #1

They certainly can act in both capacities... Octafish Jul 2012 #2

I think they were terrified Warpy Jul 2012 #5

I always find that interesting. xchrom Jul 2012 #7

"terrified"? And not corrupt? AnotherMcIntosh Jul 2012 #8

Can Geithner retroactively retire? girl gone mad Jul 2012 #3

INDEPENDENT PROSECUTOR, PLEASE... MrMickeysMom Jul 2012 #4

Local building inspectors have no problems with regulating their citizens. Trillo Jul 2012 #6

Sad K&R. Overseas Jul 2012 #9

xchrom

(108,903 posts)

1. Are the Gate Keepers corrupt or inept?

Reply to Octafish (Original post)

Tue Jul 17, 2012, 06:26 PM

Jul 2012

Not a good answer either way.

Octafish

(55,745 posts)

2. They certainly can act in both capacities...

Reply to xchrom (Reply #1)

Tue Jul 17, 2012, 06:56 PM

Jul 2012

...whichever is needed to dodge their responsibilities.

From 2008:

Fed knew of Libor issue in 2007-08, proposed reforms

* Questions over whether Fed did enough over Libor concerns

* May have known as early as August 2007 about flaws

* Geithner calendar included "Fixing LIBOR" meeting in 2008

* Fed says got anecdotal Barclays reports of Libor problems

* Fed says shared suggestions for reform with UK authorities

By Carrick Mollenkamp
Reuters.com
Tue Jul 10, 2012 5:24pm IST

July 10 (Reuters) - 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.

SNIP...

NO ULTIMATE RESPONSIBILITY

The scandal has thrown into sharp relief a potential regulatory gap: No single regulator appears to have had ultimate responsibility for making sure rates banks submitted were honest.

On Monday, the Bank of England's Tucker called the issue of banks improperly submitting rates a "cesspit."

SNIP...

Darrell Duffie, a Stanford University finance professor who has followed the Libor issue for several years, said that he believed regulators were "on the case reasonably quickly" after questions were raised in 2008.

"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."

CONTINUED...

http://in.reuters.com/article/2012/07/10/libor-fed-idINL2E8IA14120120710

Unlike trickle-down economics, which goes on forever in Washington DC, the incompetent regulator act can only go so far.

Warpy

(111,383 posts)

5. I think they were terrified

Reply to xchrom (Reply #1)

Tue Jul 17, 2012, 07:06 PM

Jul 2012

Charging some of the largest and supposedly most solid financial institutions in the world with rate fixing might have started a panic ending in bank runs. While I find this far fetched, since the whole thing could have been contained as another boring accounting scandal, nothing to see here, I can understand the level of fear.

Not to mention, of course, that their own portfolios are probably stuffed with financial institutions pulling similar shenanigans--and worse.

Still, they knew how serious it was and did nothing. Paralyzed by fear is the first thing that comes to mind.

xchrom

(108,903 posts)

7. I always find that interesting.

Reply to Warpy (Reply #5)

Tue Jul 17, 2012, 07:52 PM

Jul 2012

What would they 'run' from?

I find it hard to believe that people that work so intimately w/ the system would pull up stakes & go where?

Some place less corrupt?

& that would be what? Government bonds?