Libor Manipulation: UBS Makes Deal; Was Geithner Tipped in 2008?

Receiving Wide Coverage ...

UBS Fined in Libor Probe: An irony of the Libor probe is that it's looking nearly as choreographed and negotiated as the long-running rate manipulation that preceded it. Early this morning UBS and Swiss regulators announced the bank had agreed to a $1.5 billion settlement, and arrests of people connected with the Swiss bank are expected today, according to anonymous sources. RBS is next in line to settle, these same sources say. As for that $1.5 billion UBS fine: despite rolling over early in the international probe, the bank played a central role in the manipulation, anonymous investigators believe. A Japanese subsidiary stepped up to take a single fraud conviction, though that doesn't seem to risk bringing UBS down Arthur Andersen style.

More interesting is a massively damning Financial Times story conservatively titled "Geithner was told of Libor fears in 2008." Unlike previous reports suggesting that central bankers simply suspected banks might be suppressing Libor submissions during the crisis, this story alleges that Treasury Secretary Timothy Geithner, who was then president of the New York Fed bank, was notified by a colleague in May 2008 of her suspicion that Libor was being gamed for profit. Fed official Hayley Boesky (who's now moved on to Bank of America) told Geithner in an email that the same executives who oversaw Libor also oversaw the bank derivatives positions. The employees who submitted Libor rates "verify the posting with the boss to make sure it fits their derivatives position." The emails cited by the FT are not among those made public by the Fed, raising questions of whether the regulator sought to hide them. Other emails by New York Fed employees stated that the British Bankers Association's submission standards were fiction. This story alleges that the Fed was aware of foundational fraud in the financial markets and did not intervene. But that's not how Treasury's spinning it: "The record confirms that as president of the New York Fed, Secretary Geithner helped to identify the problems with Libor, briefed Treasury and US regulatory agencies on the issue, and pressed for reform by the British Bankers' Association of the Libor rate-setting process in London," a spokeswoman told the FT.Financial Times, Wall Street Journal

Wall Street Journal

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