Geithner: Knew of LIBOR issue, initiated reform process in 2007
U.S. Secretary of the Treasury Timothy Geithner speaks as Sen. Charles Schumer (D-NY) listens on Capitol Hill in Washington, DC.
Jeff Horwich: The House Financial Services Committee served up some grilled Geithner this morning. Treasury Secretary Timothy Geithner testified before the panel.
Marketplace's Nancy Marshall Genzer joins us now from Washington. Good morning, Nancy.
Nancy Marshall-Genzer: Good morning, Jeff.
Horwich: Nancy, why the grilling?
Marshall-Genzer: Geithner was officially presenting a report from the Financial Stability Oversight Council on the state of the economy. But the toughest questions were about British banks' manipulation of the LIBOR interest rate. LIBOR is used to set rates for mortgages, student loans and car loans around the world. At the time, Geithner was head of the New York Fed.
Horwich: And he has said that he had inklings at least of what was going on with LIBOR back in 2007, what kind of tough questions did he get about that today?
Marshall-Genzer: He was asked what-did-you-know and when-did-you-know it types of questions. Some of the sharpest questions came from Congressman Jeb Hensarling. He's a Republican from Texas. Here's a bit of back and forth between Hensarling and Geithner. Hensarling starts out by asking Geithner why there wasn't a tougher response when the Libor manipulation first came to light.
Jeb Hensarling: It appears that you treated it almost as a curiosity or something akin to jaywalking as opposed to highway robbery.
Geithner replies that he did tell top U.S. regulators about the problem.
Timothy Geithner: We were very concerned about it. What we decided to do was try to initiate a reform of the process with the British, but also just to make sure the relevant authorities made use of it.
Geithner was also asked whether he was aware of the possibility of fraud with LIBOR. He said he was aware of the risks that banks would be tempted to tamper with LIBOR. And there would be more questions about LIBOR more grilling of Geithner tomorrow, when he testifies before the Senate Banking Committee.
Horwich: Marketplace's Nancy Marshall-Genzer, thank you.
Marshall-Genzer: You're welcome.