The Federal Reserve Bank of New York on Monday released a battery of documents to Congressional investigators that detailed the regulator's response to interest rate manipulation at some of the world's biggest banks.
The New York Fed turned over nearly 6,000 pages to a House subcommittee - documents that include internal communications as well as correspondence with its fellow banking regulators. The documents relate to the London interbank offered rate, or Libor, a key benchmark that some banks gamed to bolster profits during the depths of the financial crisis. The subcommittee ordered the New York Fed to detail its correspondence with other regulators about rate manipulation across the banking industry.
The rate-rigging scandal came into focus this summer after Barclays struck a $450 million settlement with authorities over accusations that it reported bogus Libor figures. The case, the first of several actions expected to arise from investigations into more than a dozen banks, raised questions about why the New York Fed and other regulators failed to thwart the illegal activity. The concerns led the oversight panel of the House Financial Services Committee to examine whether the New York Fed turned a blind eye to rate-rigging during the financial crisis.
It is unclear whether the New York Fed documents provided to Congress on Monday will corroborate those concerns. The documents are not yet public, in part because some of the information remains confidential. The subcommittee, which is run by Representative Randy Neugebauer, Republican of Texas, did not say whether it would eventually release the material on Libor, a benchmark for the price of trillions of dollars in mortgages and other loans.
“The subcommittee staff has now begun its review of these documents,†a spokeswoman said on Monday.
But in a statement on Monday, a New York Fed spokesman said the materials “are consistent†with an earlier rele ase of Libor-related documents that centered only on Barclays. In July, the regulator released a trove of information about the British bank that, by the New York Fed's account, highlighted its rapid response to the problems.
“The New York Fed helped to identify the problem of under-reporting of Libor, briefed U.S. Treasury and other regulatory agencies on the issue and worked to address the problem at its core by pressing for reform of the flawed Libor rate-setting process in London,†the spokesman said.
While the Barclays documents did indicate that the New York Fed advocated broad reforms to the rate-setting process and passed along concerns to other regulators, the agency was attacked for not going further. The material showed that the New York Fed learned in April 2008 that Barclays was reporting false interest rates but it did not refer the specific wrongdoing to federal prosecutors or other investigators.
At the time, a Barclays employee told a N ew York Fed official that “we know that we're not posting um, an honest†rate. The employee suggested that other big banks posted similarly phony reports, saying that Barclays wanted to “fit in with the rest of the crowd.â€
