Geithner’s role in the unfolding scandal around the London interbank offered rate, or Libor, centers on whether he responded aggressively enough in 2008 after he learned of potential rate-fixing while serving as head of the Federal Reserve Bank of New York. The Libor is a benchmark for hundreds of trillions of dollars worth of credit cards, mortgages, student loans and financial securities.
At the hearing, Geithner stuck to a defense he expressed last week — that once he learned of the manipulation, he sounded alarms to British and U.S. regulators.
“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 told the House Financial Services Committee.
But Republicans hammered Geithner about why he did not inform lawmakers during numerous congressional hearings or in the lengthy debate over Wall Street regulation. Rep. Jeb Hensarling (Tex.) charged that Geithner treated the Libor manipulation “as a curiosity, or something akin to jaywalking, as opposed to highway robbery.”
Other GOP members noted that even though Geithner knew of possible rate-fixing, the Federal Reserve still used Libor in several financial rescue programs.
“We were in the position of investors all around the world,” Geithner responded. “We had to make a choice about what was the best rate. It was a rate that was vulnerable to manipulation, but we tried to initiate reform with the British.”
The scene, at times combative, thrust the soft-spoken Geithner into the familiar role of political punching bag with just months left in his tenure, which he said will end after Obama’s first term, whether or not the president is reelected. Among the most partisan activists on the right and left, Geithner has been accused of too aggressively regulating Wall Street and for being too lax on big banks.
The Libor scandal, which exploded last month after the British banking giant Barclays agreed to a $450 million settlement with regulators, has allowed Geithner’s longtime critics to renew their gripes over the Obama administration’s response to the global economic crisis.
Yet even as the president’s antagonists on the Hill attempted to make political hay of the situation, the White House responded forcefully, as it has each time Geithner has come under fire. During an election season focused on Obama’s handling of the economy, White House officials said they welcomed a debate over how the administration has dealt with the banking industry.
“It’s ironic that Republicans are jumping on this,” White House press secretary Jay Carney said. “They continue to fight alongside lobbyists for Wall Street to undo, repeal or water down Wall Street reforms.”