Libor scandal ripples across the Atlantic

Suddenly, this month’s diary looks far more arduous for Tim Geithner who, as US Treasury Secretary, sets America’s economic policy alongside Federal Reserve chairman Ben Bernanke.

Both have been called to testify before the Senate Banking Committee on the scandal surrounding Libor, a measure of the cost of money that is used as the basis for more than £200 trillion in loans.

The committee will take Geithner back to when he was president of the New York Fed, the central bank’s ears and eyes on Wall Street. Comfortably the most powerful of the 12 regional branches the Fed has dotted around the US, it was to the NY Fed that Barclays said it first turned in August 2007 to voice concern over the daily calculation of Libor.

According to documents recently published, Barclays’ chief anxiety was that during the calculation of Libor – which involves more than 10 banks submitting borrowing costs which are then averaged out – rivals were understating the rate, a process the British bank claims made it look in worse financial shape than it was.

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