WASHINGTON — Treasury Secretary Timothy F. Geithner told lawmakers Wednesday that he acted appropriately as president of the Federal Reserve Bank of New York when he learned in 2008 that a key international interest rate could be manipulated by large banks.
But despite concerns that the London Interbank Offered Rate, or LIBOR, was vulnerable to under-reporting by banks at the time, Geithner said he and other Fed officials felt it was not a problem to use the rate to set the terms for the $182 billion bailout of American International Group and a $1 trillion emergency lending program called the Term-Asset Backed Securities Loan Facility.Comment on this story
"We, like investors around the world, had to take advantage of the rates available at that time, and we chose LIBOR at the time like many others," Geithner told the House Financial Services Committee as he testified for the first time about the rate-rigging scandal.
Geithner said it was not clear if taxpayers paid more for those bailouts because the interest rate was rigged.
British investment bank Barclays in June agreed to pay $450 million to settle rate-manipulation charges filed by U.S. and British officials, whose investigation is continuing. The New York Fed regulates Barclays' U.S. operations.