Congress has eased demands that the Federal Reserve Bank of New York turn over thousands of documents that detail interest rate manipulation at big banks, whittling down the request and granting the regulator additional time.
The reprieve will afford the New York Fed an additional month to comply with the sprawling inquiry, according to people briefed on the matter. Before the delay, the agency was under pressure to meet a Sept. 1 deadline.
The original document request came in July, when the oversight panel of the House Financial Services Committee sought volumes of records about the London interbank offered rate, or Libor, a key interest rate that affects the cost of trillions of dollars in mortgages and other loans. In a letter at the time, the subcommittee asked the New York Fed to detail its correspondence with employees from the banks that help set the benchmark, which is at the center of a multiyear rate-rigging scheme. The subcommittee, led by Represent ative Randy Neugebauer, also ordered the Wall Street regulator to turn over its internal Libor-related documents and any communication with other government authorities.
In addition to the one-month extension, the subcommittee is now narrowing the scope of its request. Lawmakers are planning to seek communication among government authorities and documents circulated internally at the New York Fed, a person briefed on the matter said. By steering clear of emails from bankers, the inquiry could avoid complicating a wide-ranging criminal investigation.
The New York Fed this summer already produced reams of transcripts from phone calls its officials had Barclays. Barclays was the first to settle accusations that it tried to manipulate Libor for its own benefit. It struck a $450 million settlement with the Justice Department as well as regulators in the United States and Britain.
Regulators and criminal authorities around the world are investigating more than a dozen other big banks, including HSBC and Deutsche Bank, for their role in gaming the interest rate, a measure of how much banks charge each other for loans. Banks are suspected of reporting bogus rates during the financial crisis to boost profits and to shore up their image.
The scandal has consumed the banking industry and called into question the New York Fed's oversight powers. In the case of Barclays, the New York Fed learned in 2008 that the British bank was submitting false rates.
“We know that we're not posting um, an honest†rate, a Barclays employee told a New York Fed official in April 2008, according to transcripts the regulator released to Congress in July. During the crisis, when high borrowing costs were a sign of poor health, banks were artificially depressing the rates to project a stronger image.
But rather than pushing for a civil or criminal crackdown, the New York Fed advocated policy changes to the rate-setting process. The British organization that oversees the rate adopted some of the changes. With the crisis in full swing, the New York Fed moved on to more pressing concerns.
That approach has drawn sharp scrutiny from the subcommittee.
“As you know, the role of government is to ensure that our markets are run with the highest standards of honesty, integrity and transparency,†Mr. Neugebauer, a Texas Republican, wrote in a July 23 letter to the New York Fed. “Therefore, any admission of market manipulation - regardless of the degree - should be swiftly and vigorously investigated.â€
