Amid calls for an investigation into what regulators knew about banks misreporting their Libor submissions, including a push from a dozen senators for criminal charges, on Thursday a memo surfaced that reveals Timothy Geithner pushed British regulators to reform the way Libor is calculated when he was president of the Federal Reserve Bank of New York. In a June 1, 2008, e-mail obtained by the Washington Post (+2 on the Aunt Deborah Test), the current Treasury Secretary gave the head of the Bank of England a list of six recommendations for "Enhancing the Credibility of LIBOR," including, “strengthen governance and establish a credible reporting procedure” and “eliminate incentive to misreport." The New York Fed suggests this proves they were on top of the problem and it was British regulators who dropped the ball, but it's still unclear what exactly Geithner did to stop misreporting.
On Friday morning, the New York Fed is set to release more documents related to Libor, which spokesperson Andrea Priest says, “will show that the New York Fed took prompt action four years ago to highlight problems with Libor and press for reform.” However, it may be exaggerating its whistle-blower role to deflect blame in the growing scandal.
It was revealed this week that the New York Fed became aware of problems with Libor in 2007. By the time Geithner sent the memo, Barclays had already been fudging its submissions for some time. A source involved in the U.S. and British investigation told the Post that the New York Fed wasn't a key force pushing the inquiry forward. In his e-mail, Geithner tells Mervyn King, the governor of the Bank of England, that they "would be grateful if you would give us some sense of what changes are possible." A source says that the regulators continued to discuss the issue, yet nothing was done to fix the problem.
On the off chance that the documents released tomorrow don't put these questions to rest, Geithner will have the opportunity to explain in detail in two weeks. He's scheduled to appear before the Senate Banking Committee and the House Financial Services Committee, so he can chat face to face with some of these furious lawmakers.