Weekend Economists Waiting for FDR July 13-15, 2012

[Demeter]

3. New York Fed Was Aware of False Reporting on Rates (LIBOR)

http://dealbook.nytimes.com/2012/07/13/barclays-informed-new-york-fed-of-problems-with-libor-in-2007/

The Federal Reserve Bank of New York learned in April 2008, as the financial crisis was brewing, that at least one bank was reporting false interest rates.

At the time, a Barclays employee told a New York Fed official that “we know that we’re not posting um, an honest” rate, according to documents released by the regulator on Friday. The employee indicated that other big banks made similarly bogus reports, saying that the British institution wanted to “fit in with the rest of the crowd.”

Although the New York Fed conferred with Britain and American regulators about the problems and recommended reforms, it failed to stop the illegal activity, which persisted through 2009.

British regulators have said that they did not have explicit proof then of wrongdoing by banks. But the Fed’s documents, which were released at the request of lawmakers, appear to undermine those claims...