The documents, released in response to congressional inquiries, add to the mounting questions about whether federal regulators were aggressive enough in addressing irregularities at the heart of the global financial system.
The new disclosures show that the New York Fed shared its concerns about the London-based Libor rate with British regulators. But the Fed offered no evidence that it had taken additional steps, including exercising its own authority as the regulator of some of the largest U.S. financial firms, to address the rigging of the rate.
“The New York Fed helped to identify problems related to LIBOR and press the relevant authorities in the UK to reform this London-based rate,” the Fed said in a statement. The Fed declined to say what other steps it might have taken and is still exploring whether there are more details it can release.
The manipulation by Barclays did not end until some point in 2009, offering the freshest evidence of how regulators struggled to oversee the largest banks during the global financial crisis.
The scandal involving Libor blew into the open late last month when Barclays paid a $450 million fine and admitted it had manipulated the rate.
Libor is set by 18 of the world’s largest banks, including U.S. giants JPMorgan Chase, Bank of America and Citigroup. Each bank reports its cost for borrowing money and these figures are used to calculate the Libor rate.
In the newly released documents, a Barclays employee is quoted telling a New York Fed official, “We know we’re not posting um, an honest Libor . . . If we didn’t do it, it draws, um, unwanted attention to ourselves.”
Barclays reported that its borrowing costs were lower than they really were in an effort to make the bank look healthier than it really was. Lower interest rates would mean that other banks considered Barclays to be less risky and also that Barclays could save money on borrowed funds.
Libor is the benchmark for a wide range of lending, including student loans, credit cards and some mortgages. Corporations, pension funds and municipalities based some of their investments on the benchmark rate.
Dozens of states, cities and other government entities are now exploring whether they lost money because of the alleged manipulation of this crucial benchmark. They say they may have been robbed of millions of dollars in returns on investments