Geithner Caught Condoning
July 26, 2012 (EIRNS)In both hearings addressed by Treasury Secretary Tim Geithner this week, the Secretary was put on the spot as to what he did about the evidence, provably in his possession in 2007-2008, that leading banks were illegally fixing the London Interbank Offered Rate (Libor). The answer was clear: nothing.
Sen. Richard Shelby (R-Ala.), ranking Republican on the Senate Banking Committee, after establishing that Geithner knew in May 2008, if not before, that the rigging of LIBOR involved three U.S.-based banks, asked,
"Did you follow up after notifying the Working Group [of bank regulatory agencies] and the Bank of England; did you notify the Attorney General of the United States, the Justice Department?"
Geithner responded about the way he did to most questions all day:
"We are the New York Fed, my colleagues back my former colleagues are carefully looking through all the records of what the who the whom the New York Fed staff informed at that point."
Shelby cut in,
"Did you, sir, as president of the Bank, did you personally inform...?"
"No, I I did..."
Sen. David Vitter (R-La.) later reprised many of the same questions and elicited the same non-answers from Geithner. Vitter and Shelby challenged Geithner for using the Libor rate he knew was rigged, to set the interest rates for the Troubled Assets Relief Program (TARP) and other bailout programs. But neither cited the clear statements by Bank of England Governor Mervyn King, Commodity Futures Trading Commission Chairman Gary Gensler, and others that Geithner never raised any actual alarm about rigging of Libor with any of them (though he talked about his pet theories for "reforming" it). Nor did they demand to know why Geithner never mentioned a word about Libor rigging in his many testimonies before Congressional committees since 2008.
At the House Financial Service Committee on July 24, Geithner was repeatedly confronted with his criminal complicity in the cover-up of the Libor fraud.
Rep. Spencer Bachus (R-Ala.) asked Geithner, when did he report the Libor rate fixing to the Treasury and to the Department of Justice, and to whom?
Geithner avoided answering the question in respect to the Department of Justice and instead said that he had reported it to the President's Working Group on the Financial Markets in 2008, when he was head of the New York Federal Reserve.
Bachus followed up by asking the question raised in the Washington Post by Neil Barovsky, as to why he used the Libor rate, which he knew was fraudulent, for the insurance giant AIG and the U.S. Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF).
Geithner's answer was:
"We chose Libor at that point, as did many others."
Rep. Jeb Hensarling (R-Tex.) followed up on this line of questioning by pointing out that Geithner's "early response" to knowledge of the Libor rate-fixing "was to keep using it." Other Republicans followed suit. Rep.
Rep. Randy Neugebauer (R-Tex.) revealed that there are reports of e-mails about the fixing of the Libor rate dating back to the fall of 2007. Geithner claimed that he only remembered hearing about it in 2008, but said that he is reviewing his earlier emails. Neugebauer stressed that what was involved was not merely a structural problem but was fraud, and, referring to the comments by the former special counsel to the Financial Crisis Inquiry Commission, asked Geithner, did he not have an obligation to make a criminal referral?
While a number of Democrats were soft on Geithner's responsibility for Liborgate, in some cases trying to blame it on the Bush administration and thus let Geithner off the hook, Brad Miller (D-N.C.) pointed out that the e-mails reveal not just an opportunity for manipulation of the rates, but an actual criminal act. He then repeated the question first posed by Bachus, which Geithner did not answer. Did you report this to Justice?
Geithner initially tried to squirm out of answering the question by saying that he did not know what the New York Federal Reserve staff did. But Miller pressed him and asked specifically whether he, Timothy Geithner, had reported it to the Justice Department.
Geithner's answer says it all: "No, I did not."