In a sign of Capitol Hill's growing concern over alleged interest rate-rigging by banks, a closed-door briefing on Friday that had been planned as a discussion on the economy and job growth ended up being dominated by the Libor scandal that has rocked the financial world.
Democratic and Republican staffers for the Senate Banking Committee had invited Federal Reserve officials up to the Hill for a prep session ahead of Fed Chairman Ben Bernanke's testimony on Tuesday as the interest-rate tempest gathered steam. The House and Senate are both abuzz with questions about what the Fed and other U.S. regulators knew and when they knew it.
At Tuesday's hearing, senators followed their staffers' lead, grilling Bernanke on how banks could have manipulated Libor, a global benchmark interest rate. Bernanke called the matter "very troubling" and said it could undermine market confidence. He also defended the New York Fed, arguing that the central bank rapidly followed up when officials first learned of potential rate manipulation four years ago. He argued that Libor, which is based on self-reporting by banks, was "structurally flawed."
Democratic Sen. Jack Reed asked Bernanke if he could assure Americans that Libor is reliable and that the changes recommended by the New York Fed in 2008 were put into place. Bernanke answered that he didn't have "full confidence" that the changes were made.
And that's exactly the kind of answer that's likely to get Bernanke a return invitation to the hot seat.