WASHINGTON (Reuters) - Below are highlights from a House Financial Services Committee hearing on Wednesday with U.S. Treasury Secretary Timothy Geithner, where he addresses financial oversight and his handling of the Libor manipulation scandal.
”There was a lot of concern in the market, a lot of talk in the financial markets, much of it was ultimately published in major newspapers of record, about not just the potential that banks could misrepresent what they were paying to borrow, but they were actually doing that.
”We, at least I, first learned about those concerns in the early parts of spring of 2008 and we acted very quickly at that stage.
“We learned about it through a variety of different ways.”
“At the New York Fed, I believe we did the necessary appropriate thing very early in the process.”
“We were worried about (LIBOR), we were concerned about it, and that is why we did what we did at that point, despite all of those other preoccupations.”
”In the detailed recommendations we gave to the British we identified a series of specific things that would make it untenable for this rate to be affected by the banks’ incentive to lower their reported cost of funds.
“We gave them very specific detailed changes for doing that. If those had been adopted sooner, you would limit this risk going forward.”
”In 2008, as the financial crisis intensified and there were broader concerns about the financial strength of banks, European banks were having a tougher time raising dollars, those Libor rates began to rise. And there was a lot of concern in the market that the way the rate was structured made it vulnerable to misreporting. Those concerns were widely available in the market and they were published in the Wall Street Journal and the Financial Times among other publications.
”At that time, this is in the spring of 2008, we took a very careful look at these concerns, we thought those concerns were justified. And we took the initiative to bring those concerns to the attention of the broader U.S. regulatory community, including all the agencies that have responsibility for market manipulation and abuse.
“I briefed the president’s working group on financial markets. The members of that group included the CFTC the SEC and the Fed. Justice is not a member of that committee.”