US lawmakers extend Libor probe

The Libor investigation is to be extended as US lawmakers have requested more documentation from the Federal Reserve Bank of New York to find out how the regulator checked reports of manipulation.

The House financial services committee’s panel of investigators has requested all records of Libor submissions made by banks to the New York Fed and all other records between the New York Fed and organisations in the UK.

The US will be attempting to ascertain what regulators on both sides of the Atlantic knew about Libor manipulation with a view to beginning criminal proceedings against traders involved.

At least a dozen traders from nine separate banks are being investigated for allegedly working together in small groups to attempt to manipulate rates on different continents.

Investigators are beginning to conclude that the Libor fixing went on for a number of years, was widely known within trader circles and was organized. This has led them to probe deeper into the banks where the employees worked to find out exactly what was known when by whom.

Barclays and Swiss bank UBS are said to be helping regulators to investigate. This is because they employed traders who were allegedly leading the rate-rigging process.

Former head of the New York Federal Reserve, Tim Geithner, now US Treasury Secretary, says that he warned the Governor of the Bank of England, Sir Mervyn King, “very early” about their concerns over the possible rigging of Libor.

Emails released by the NY Fed reveal that Governor King was warned by Mr Geithner in May 2008.

The Bank of England says that the documents warned about the accuracy of the lending gauge but not about deliberate attempts at manipulation. Sir Mervyn King told the Treasury Select Committee (TSC) last week that he had only found out about misrepresentation of Libor rates a few weeks ago.

However, Mr Geithner is facing criticism from the US Senate banking committee that he should have been investigating the manipulation of Libor in a more aggressive way once he became aware of the risks.

Republican chairman of the House financial services committee’s investigations panel, Randy Neugebauer said on Monday: “As you know, the role of government is to ensure that our markets are run with the highest standards of honesty, integrity, and transparency. Therefore, any admission of market manipulation – regardless of the degree – should be swiftly and vigorously investigated.”