Treasury Secretary Timothy Geithner defended his actions related to a rate-rigging scandal Wednesday, saying in an interview on CNBC that he acted quickly and correctly when he became aware of the issue.
Geithner also promised a comprehensive global reform effort for LIBOR -- a benchmark interest rate that affects the price at which consumers and companies across the world borrow funds. The rate hit the headlines recently after Barclays paid $453 million to regulators in the U.K and the U.S. to settle accusations it had tried to influence it as far back as 2005.
Asked about his knowledge of problems with LIBOR as early as 2008, when he was head of the New York Federal Reserve and wrote to U.K. regulators recommending ways to enhance the reliability of the rate, Geithner said he acted “very early and forcibly” in response to concerns that the processes to set the rate were “impaired and flawed and vulnerable to misrepresentation.”
“The U.S., to its credit, set in motion at that stage a very, very powerful enforcement response, the first results of which we have now seen,” Geithner told CNBC at the Delivering Alpha conference in New York, also acknowledging that the enforcement action had taken time.
“It’s the first step; there’s more to come,” he added, suggesting more banks will be implicated in the rate-rigging scandal, which is expected to be one of the largest to hit the banking sector since the financial crisis.
“Enforcement authorities have said this is the first in a series of enforcement actions they intend to take,” Geithner said.
Other banks that have disclosed that they are under investigation for LIBOR manipulation include Citigroup and JPMorgan Chase, and also HSBC, Deutsche Bank and the Royal Bank of Scotland.
Barclays is the only bank to admit any misconduct in giving false information in the complex process of setting the LIBOR rate, which is calculated daily in London by a group of banks. The rate is then used to set payments on some $360 trillion worth of financial instruments, ranging from credit cards to more complex derivatives, such as futures contracts.
Questions remain over what U.S. and UK regulators have done to fix the problems with LIBOR since they became aware of them in 2008.
Appearing before lawmakers Tuesday, Federal Reserve Chairman Ben Bernanke defended the central bank’s response to the manipulation of LIBOR, saying regulators had taken the lead and informed relevant authorities in the U.K and the U.S.
“It’s important we demonstrate to the world that we have the best enforcement response anywhere, to make sure investors have the protection they need,” Geithner said.