Treasury Secretary Timothy Geithner, fighting perceptions that he has been overly protective of Wall Street, defended his actions in the Libor rate-rigging scandal, saying on Wednesday that he did the "fully appropriate thing" when he learned of manipulation of the benchmark interest rate.
Testifying before the House Financial Services Committee, Geithner faced pointed questions from Republican lawmakers about his handling of bank admissions of rate manipulation discovered five years ago when he was president of the Federal Reserve Bank of New York. Democrats were largely supportive of the Treasury secretary, although they, like their Republican counterparts, have expressed outrage over the Libor case.
House Financial Services Committee Chairman Spencer Bachus, R-Ala., pressed Geithner for details about whom he informed of rate manipulation and whether he did enough to ensure it was addressed.
Geithner insisted he had pursued the right course of action by informing other regulators of the potential problem and suggesting reforms to British authorities in 2008.
“I felt that we did the important and fully appropriate thing, which was to bring attention not just to the people in Washington but to the British--not just the reports and the concerns in the market that were broadly available in the public domain but also of the range of problems in the way this rate was designed that created that vulnerability. So we brought those concerns to their attention and we felt--and I still believe this--that it was really going to be on them to take responsibility for fixing this,” he said.
Accusations that Geithner has been overly cozy with Wall Street have plagued the Treasury secretary throughout his tenure, and the Libor case has revived those criticisms.
Further putting a spotlight on those criticisms is a new book, Bailout, written by Neil Barofsky, the watchdog for the Troubled Asset Relief Program, the controversial $700 billion bailout of the financial sector. During his tenure at the Fed, Geithner was a chief architect of TARP, and Barofsky portrays Geithner as beholden to the financial sector he helped rescue.
Rep. Barney Frank, D-Mass., the ranking member on the House Financial Services Committee, said at the hearing that Geithner had limited power as the head of the New York Fed and that other regulatory officials--most of whom were appointed by President George W. Bush--failed to step up to the plate.
“You were important but not one of the top officials,” Frank said. “You had a chairman of the Federal Reserve who was using the Libor to set the rates; Mr. Bernanke was in charge of AIG; you had secretary of the Treasury [Henry] Paulson. I do want to remind people that this all happened under the administration of President Bush. The President’s Working Group, to which you reported, was President Bush’s working group.”
“I stress that because there was a failure to be tough enough with these private-sector people who were doing this, but the notion that this was all the problem of the president of Federal Reserve of N.Y. is frightening,” he added.
Rep. Carolyn Maloney, of New York, who is the third most senior Democrat on the panel, went out of her way to praise Geithner for “extraordinary public service” for steering the country out of the Great Recession and for the Treasury’s support of the auto industry, through its bailout under TARP, saved 1.4 million jobs.