BAIER:A growing scandal in Europe over the raking of a global interest rate is now also getting play here in the U.S. And chief Washington correspondent, James Rosen, tells us it involves a man who is now a key player in the Obama administration.
(BEGIN VIDEOTAPE)
JAMES ROSEN, FOX NEWS CHIEF WASHINGTON CORRESPONDENT (voice-over): Newly released documents show that when treasury secretary, Timothy Geithner, was president of the New York Federal Reserve four years ago, central bankers got an early glimpse into the now mushrooming scandal surrounding the London Interbank Offered Rate or LIBOR which is the average interest rate that banks in London charge other banks seeking loans.
Barclays, the large British bank has paid out more than $450 million in the legal settlement, and top officers there have resigned on the disclosures that some bankers were deliberately misreporting data to fix LIBOR illegally.
MATT MCCORMICK, BANKING ANALYST: You have a manipulation in prices. And this affects every investment decision that people made, whether it'd be an interest rate, whether it'd be a loan, whether it'd be a derivative that people can come back and say, hey, I suffered a loss because this rate was artificially set. And it was wrong and I deserve compensation.
ROSEN: In April of 2008, investigators at the New York fed interviewed key witnesses, quote, "The Barclays employee explained that Barclays was underreporting its rate to avoid the stigma associated with being an outlier with respect to its LIBOR submissions relative to other participating banks."
The New York Fed disclosed today adding, "The Barclays employee also states that in his opinion, other participating banks were also underreporting their LIBOR missions."
NARIMAN BEHRAVESH, HIS CHIEF ECONOMIST: It could have a big impact clearly on the banking industry depending as you guys are saying earlier what this class action suit might look like. So, you know, bank stocks, bank profits could take another big hit.
ROSEN: Seven weeks after the Barclays employee disclosed wrongdoing, Geithner e-mailed the governor of the Bank of England, Sir Mervyn King, suggesting changes that could, quote, "eliminate the incentive for banks to misreport."
Among other things, Geithner urged that the British Bankers Association or BBA require that a reporting banks internal and external auditors confirm adherence to best practices and attest to the accuracy of bank's LIBOR rate.
(END VIDEOTAPE)
SOURCE:
Fox News Network
July 13, 2012 Friday
SHOW: FOX SPECIAL REPORT WITH BRET BAIER 6:00 PM EST
Political Headlines
BYLINE: Bret Baier, Carl Cameron, Wendell Goler, Jim Angle, Mike Tobin, James Rosen
SECTION: NEWS; International
LENGTH: 3676 words
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