Treasury Secretary Timothy Geithner told lawmakers Wednesday that he did his part to address concerns over the rigging of a key interest rate, saying enforcement of the matter fell to other regulators.
Geithner was pressed by several Republican lawmakers on why, when he was in charge of the New York Federal Reserve Bank in 2008, he did not do more to press concerns that the London Interbank Offered Rate (Libor) was being manipulated by banks.
Geithner argued the New York Fed played its part when it informed other regulators both in the United States and the United Kingdom of the problem, a point he has made in the past.
"We brought those concerns to their attention and we felt, and I still believe this, that we felt it would be on them to fix this," he told the House Financial Services Committee.
"At the New York Fed, I believe ... we did the necessary, appropriate thing very early in the process," he added later.
British bank Barclays paid nearly half a billion dollars earlier this month to settle charges with U.S. and U.K. regulators that it worked to manipulate the rate for years. The Libor is set based on interbank lending reports from a group of 18 banks, including three based in the U.S., and is monitored by the British Bankers Association.
Barclays has since indicated that other banks conspired to rig the rate, and lawmakers and regulators are digging in on when the issue first arose and how it continued.
The scrutiny has brought pressure on Geithner, particularly from Republicans, on why the New York Fed did not do more to explore the problem when it first emerged. They have asked why the New York Fed did not refer the matter to the Department of Justice in addition to financial regulators.
Several GOP members on Wednesday depicted Geithner's actions as inadequate, and some noted the New York Fed continued to use Libor as a benchmark rate even after first hearing of the problems.
"It appears as if you treated it almost as a curiosity, or something akin to jaywalking, as opposed to highway robbery," said Rep. Jeb Hensarling (R-Texas), vice chairman of the panel.
Rep. Scott Garrett (R-N.J.) was visibly frustrated with Geithner for failing to highlight the issue sooner and accused him of deflecting blame.
"We're looking for the Secretary of the Treasury not to come in after the fact and do what every regulator has already, and point the finger somewhere else," he said. "When's something going to happen with the regulators who did something wrong here ... will any regulators, from the top down, lose their job?"
Geithner said the New York Fed continued to use Libor since it was "the best rate available at the time," but added that regulators are looking into other rates that could supplant Libor as a benchmark.
He also said British regulators dropped the ball on reforming Libor, saying, "Obviously, we don't think they went far enough."
Many Democrats were outraged over the scandal but did not cast blame on Geithner. Instead, they directed their ire at the banks involved while pointing out that multiple parties were responsible for overseeing the rate and enforcing rules.
"These were not bad guesses ... this was conscious deception in their own self-interest," said Rep. Barney Frank (D-Mass.), the top Democrat on the committee. "Some people are dissatisfied that not enough was done. If that's the case, it seems to me the blame for that case should be broadly shared."
Frank also noted that when Geithner first learned of problems with the Libor and informed regulators, he was dealing with many officials that had been nominated by President George W. Bush and confirmed by the Senate.
Rep. Michael Capuano (D-Mass.) asked if individuals may face criminal charges over the scandal. Geithner responded cautiously.
"It is very important to this country that we have in place a very tough enforcement regime, so that people that violate the law are held accountable for their actions, so that we are deterring others from engaging in that behavior," he responded.
Rep. Brad Miller (D-N.C.) similarly pressed Geithner on the apparent presence of criminal wrongdoing, citing a conversation between a NY Fed official and an unnamed Barclays employee where the bank official admitted it was submitting false Libor rates.
"Is there any element of criminal fraud that isn't admitted to in this transcript?" Miller asked, also inquiring whether the government was considering filing suit to recover funds lost as a result of the rigging.
Geithner again dodged the question on prosecutions, saying lawyers were examining the issues. He was similarly vague on possible government suits, saying he was unsure who ended up being net winners and losers as a result of the manipulation.