The Federal Reserve Bank of New York submitted more than 6,000 pages of documents to the House Financial Services Committee on Monday. The documents were related to the investigation on the manipulation of London inter-bank offered rate (LIBOR), a benchmark used in calculating the interest rates for financial contracts, based on estimated rates on loans by major banks in 10 currencies.
The House Services Financial Committee demanded the submission of documents from the New York Federal Reserve during the leadership of Treasury Secretary Timothy Geithner, then president of the Federal Reserve. The Committee wants to know what happened between 2007 and 2009, and to find out if Geithner took necessary actions to resolve the issue.
The Libor controversy captured the headlines, and became the center of government investigations in the United States, United Kingdom, and Asia last summer, particularly when Barclays Plc. (NYSE:BCS) agreed to pay a fine of $45o million after admitting that it had submitted false London and euro interbank rates for four years since 2005. The top three executives of the bank including, Marcus Agius, Chairman; Bob Diamond, CEO; and Jerry del Missier, COO, resigned from their positions because of embarrassment.
Aside from Barclays, six major banks were investigated by U.S. authorities for alleged manipulation of the Libor, including Citigroup Inc. (NYSE:C), Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB), JPMorgan Chase & Co. (NYSE:JPM), HSBC Holdings plc (LON:HSBA) (NYSE:HBC), Royal Bank of Scotland Group plc (NYSE:RBS), and UBS AG (NYSE:UBS).
The House Financial Services Committee was concerned whether the Federal Reserve of New York ignored the practice of the major banks in manipulating the Libor during the financial crisis.
Cong. Randy Neugebauer is the chairman of the House Financial Services Committee. He requested the New York Fed to submit a detailed account of its correspondences with other government regulators regarding Libor manipulation within the banking sector.
The documents submitted to the Committee by the New York Fed is not yet available to the public. It is unclear whether the documents contain relevant information to answer the concerns of the Congress. According to the reports, a spokesperson from the Congress confirmed that the members of the House Financial Services Committee started reviewing the documents.
On the other hand, a spokesperson from the New York Fed said the documents released to the Congress were consistent with all the Libor-related documents during the Barclays investigation in July, which contains all the actions made by the Federal Reserve in response to the problem.
The spokesperson said, “The New York Fed helped to identify the problem of underreporting of Libor, briefed the U.S. Treasury and other regulatory agencies on the issue, and worked to address the problem at its core by pressing for reform of the flawed Libor rate-setting process in London.”
Documents showed that the Federal Reserve coordinated the problem with its counterparts in the United Kingdom and advocated reforms in the implementation of the Libor system to prevent misreporting and improve its credibility.