Geithner, Before Congress, Is Pinned on Libor Coverup

Geithner, Before Congress,
Is Pinned on Libor Coverup
by Nancy Spannaus
August 3, 2012 EIR National 55


54 National EIR August 3, 2012
July 28—While members of the LaRouche Political
Action Committee (LPAC) rallied outside the Capitol,
Treasury Secretary Timothy Geithner had to face some
pointed questions about his complicity in covering up
the Libor interest-rating fixing crime last week.
Geithner appeared before the House Financial Services
Committee on July 25, and the Senate Banking Committee
July 26, to present the annual report of the Financial
Stability Oversight Council. Instead, by the conclusion,
he found himself pinned into admitting that he had
failed to act to stop a financial crime—a crime which, in
reality, led to widespread suffering, and even deaths, in
localities through the U.S. and Europe.
On the eve of the testimony, the New York Federal
Reserve Bank, which Geithner headed in 2007-08, was
served with a third request from the Oversight and Investigation
Subcommittee of the House Financial Service
Committee, on the issue of the Libor crime. Subcommittee
chair Rep. Randy Neugebauer (R-Tex.)
demanded all communications about Libor from August
2007 to the present, among all New York Fed employees,
and between them and employees of any of the 18
banks that set Libor rates, and any U.S. and foreign
government agencies.
Geithner may have hoped to avoid the issue, but he
was pressed repeatedly to answer the most embarrassing
question: “Did you report the criminal behavior of
the rigging of the Libor rate to the Department of Justice?”
After hemming and hawing at some length, he
was forced to admit: “No, I did not.”
This admission lays Geithner open to prosecution.
For not only did some of the e-mails so far released by
the Bank of England indicate that he was involved in
setting the fraudulent rates, but he also was under obligation,
as a Fed official, to report criminal activity. And,
as former Special Inspector General of the TARP bailout
program, Neil Barofsky, has pointed out in repeated
public appearances, “This [Libor-rigging] was a scheme
to defraud. This is textbook securities fraud.” If
Geithner refused to report it, and in fact used the fraudulent
figures, he is guilty of a coverup, or worse.
Will Geithner be held responsible for Libor-rigging,
and other crimes he committed for Wall Street and
London bankers under the Obama Administration? That
will largely depend on the decisions taken by the political
forces now coalescing around LPAC in favor of Glass-
Steagall and a new credit system, in the weeks ahead.
House Members Confront Geithner
The Treasury Secretary’s appearance before the
House Financial Services Committee opened with a bang,
created by the shock effect of the announcement by former
CitiGroup CEO Sanford Weill that he now thinks it’s necessary
to reinstate Glass-Steagall banking separation.
One of the first questions to Geithner, from Rep. Carolyn
Maloney (D-N.Y.), addressed the Weill statement.
This is “absolutely huge,” she said. She then asked
Geithner for “a detailed answer in writing on what does
this mean to the financial crisis if investment banking
and banking had been separated, what would that have
meant for AIG, for Bear Stearns, for Lehman, for Wachovia,
for all the big banks.”
Rep. Walter Jones (R-N.C.) followed up, stating
that “the two worst votes I made in the 18 years I’ve
been in Congress were, the Iraq war, which was very
unnecessary, and the repeal of Glass-Steagall.” He then
asked Geithner, in light of reported losses at JPMorgan,
“Isn’t it time to have a discussion and debate about the
reinstatement of Glass-Steagall?” Jones added that he
had joined Rep. Marcy Kaptur in co-sponsoring H.R.
1489, which calls for reinstating Glass-Steagall, and
called for a hearing in the committee on the measure.
Reps. Bill Huizenga (R-Mich.), Stephen Lynch (DMass.),
and Steve Pearce (R-N.M.) also asked Geithner
for his response to Weill’s call.
In answer to Jones, Geithner came out against reinstating
Glass-Steagall, arguing that it had been considered
during the deliberations on Dodd-Frank, which he
described as “tough” legislation. He then appealed to
the Congressmen to “give those reforms a chance to
take effect and work.”
‘When Did You Report?’
Many Congressmen also confronted Geithner with
his criminal complicity in the cover-up of the Libor
fraud.
Committee chair Spencer Bachus (R-Ala.) asked
Geithner, when did he report the Libor rate-fixing to
the Treasury and to the Justice Department, and to
whom? Geithner avoided answering the question in respect
to the DoJ, and said that he had reported it to the
President’s Working Group on the Financial Markets
in 2008, when he was head of the New York Fed. When
Bachus asked the question raised by Barofsky, on why
Geithner used the Libor rate, which he knew was
fraudulent, in the AIG and TALF (Term Asset-Backed
Securities Loan Facility) cases, Geithner answered:
“We chose Libor at that point, as did many others” (the
“everyone was doing it” defense).
Rep. Jeb Hensarling (R-Tex.) followed up on this
line of questioning by pointing out that Geithner’s
“early response” to knowledge of the Libor rate-fixing
“was to keep using it.” He took issue with Geithner’s
statement that “it was our best
choice.” “How can a number you
know was manipulated be the best
choice?” Hensarling also forced
Geithner to admit that he was not
obligated to use the Libor rate.
Other Republicans followed suit.
Rep. Scott Garret (N.J.) pointed out
that Geithner had never once mentioned
to the committee, in multiple
appearances, that the Libor rate was
fixed. Nor had he mentioned it during
the entire debate over Dodd-Frank.
When Rep. Randy Neugebauer
(Tex.) revealed that there are reports
of e-mails about the fixing of the
Libor rate dating back to the Fall of
2007, Geithner claimed that he only
remembered hearing about it in 2008,
but said that he is reviewing his earlier
e-mails. Neugebauer stressed that
what was involved was not merely a
structural problem but fraud, and, referring
to the comments by the former
special counsel to the Financial Crisis Inquiry Committee
(Angelides Commission), asked Geithner, did he
not have an obligation to make a criminal referral?
While a number of Democrats were soft on
Geithner’s responsibility for Liborgate, Brad Miller (DN.
C.) zeroed in on the fact that the e-mails reveal not
just an opportunity for manipulation of the rates, but a
criminal act. He then repeated the question first posed
by Bachus, which Geithner had not answered. “Did you
report this to Justice?” Geithner initially tried to squirm
out of answering by saying that he did not know what
the New York Fed staff did. When Miller pressed him
and asked specifically whether he, Timothy Geithner,
had reported it to the Justice Department, Geithner had
to answer: “No, I did not.”
Before the Senate
The Senate Banking Committee’s treatment of
Geithner the next day, as of Fed chairman Ben Bernanke
last week, was much more polite than the House
Committee’s. And only one Senator brought up the
Glass-Steagall bombshell dropped by Sanford Weill on
July 25.
Sen. Richard Shelby (R-Ala.), the Ranking Member,
after establishing that Geithner knew in May 2008, if
CSPAN
Facing a fusilade of angry questions about his role in the criminal Libor-rigging
scheme, from members of Congress, Treasury Secretary Geithner squirmed and
offered evasive answers, but his crimes are catching up with him, and with his boss,
President Obama.
56 National EIR August 3, 2012
not before, that the rigging of Libor involved three
U.S.-based banks, asked, “Did you follow up after notifying
the Working Group [of bank regulatory agencies]
and the Bank of England; did you notify the Attorney
General of the United States, the Justice Department?”
Geithner equivocated: “We are—the New York Fed,
my colleagues back—my former colleagues are carefully
looking through all the records of what the—who
the—whom the New York Fed staff informed at that
point.” Shelby cut in, “Did you, sir, as president of the
Bank, did you personally inform. . .?” Geithner: “No,
I—I did. . .”
Sen. David Vitter (R-La.) reprised many of the
same questions and elicited the same non-answers.
Vitter and Shelby challenged Geithner for using the
Libor rate he knew was rigged, to set the interest rates
for the TARP and other bailout programs. But neither
cited the clear statements by Bank of England governor
Mervyn King, Commodities Futures Trading Commission
chair Gary Gensler, and others, that Geithner
never raised an alarm about Libor-rigging with any of
them. Nor did they demand to know why Geither never
mentioned a word about Libor-rigging in his many testimonies
before Congressional committees since
2008.
Sen. Mark Warner (D-Va.), not a Glass-Steagall
supporter in the past, raised it near the end of the hearing:
“A very interesting comment by one of the architects
of the collapse of Glass-Steagall, yesterday, to say,
‘Let’s put Glass-Steagall back, in case. . .’—you know,
interesting—interesting transformation there.” Warner
said that the banks’ stock market equity was trading
way below book value in their oversize state, and maybe
the market was saying size may not be an asset; he
might have been interpreted as asking Geithner to comment
on the case for Glass-Steagall.
But Geithner lied in response, “You know, Congress
thought about this question long and hard in considering
financial reform.”
In reality, the Obama Administration, in league
with Rep. Barney Frank (D-Mass.), did everything
their British controllers demanded, double-crossing
Sen. Maria Cantwell (D-Wash.) and Sen. John McCain
(R-Ariz.), whom they had promised at least a full
Senate vote on their Glass-Steagall amendment, and
instead prevented a debate on the measure. The British
government, at that time, May 2010, had communicated
to Washington that the re-adoption of Glass-
Steagall would be considered an “aggressive act.”
Obama, Geithner, et al. thus moved to kill its reinstatement.
Will There Be Action?
Now, in the face of the European blowout, a significant
faction of the British establishment has changed.
Will that shift lead to Geithner (and Obama) being
dumped?
The evidence of wrongdoing in the Libor case, of
course, is still being accumulated, as reflected in the
document requests by Representative Neugebauer. In
his July 23 letter, Neugebauer homed in on the regulatory
responsibility of the New York Fed. (Note that
Geithner has testified that he has not functioned as a
regulator—one statement that indeed seems to be true.)
The letter to the New York Fed, under Geithner during
the relevant period, states: “The documents you provided
to the Subcommittee revealed that the NY Fed
was made aware that certain financial institutions were
‘not posting honest LIBOR’ rates. . . . What is less clear
in your response is how the NY Fed dealt with admissions
of market manipulation by Libor contributing
banks. As you know, the role of government is to ensure
that our markets are run with the highest standards of
honesty, integrity, and transparency. Therefore, any admission
of market manipulation—regardless of the
degree —should be swiftly and vigorously investigated”
(emphasis added).
But there are sufficient other instances of malfeasance
that testify to why Geithner and Obama must go.
The time is overripe.
Rep. Walter Jones
(R-N.C.)
He asked Secretary Geithner at the hearing on July 25,
“Isn’t it time to have a discussion and debate about the
reinstatement of Glass-Steagall?” He has amplified his
position in interviews published in EIR. See EIR, May 18,
2012 and EIR, Oct. 14, 2011.