The current U.S. Treasury Secretary was aware of irregularities in LIBOR interest rate-setting back as far back as 2008. Tim Geithner, who was then heading of the Federal Reserve, wrote a memo to the head of the Bank of England with suggestions on how to improve the way LIBOR rates are set.
Senior officials at Barclays bank in London have resigned in the wake of a scandal about rate-fixing and a $453 million settlement. A number of British and American banks are now under investigation. There are allegations that traders manipulated rates for interbank lending in a way that distorted the so-called ‘LIBOR rates.’ These rates affect interest rates for trillions in financial products all over the world, including mortgages and student loans.
Misreported LIBOR rates could also have contributed to a sense that large banks were healthier than they really were. In 2008, Geithner made some recommendations to help “eliminate incentive to misreport.”
Twelve American senators have called for a widespread criminal probe by the Justice Department and regulators to pursue bankers who may have illegally manipulated LIBOR. Mr. Geithner has not been accused of any wrongdoing.