Chuck Grassley (R-Iowa) and Mark Kirk (R-Ill.) blamed Treasury Secretary Timothy Geithner this week for failing remove the use of the Libor interest rate that they allege he knew was rigged.
Grassley and Kirk said that Geithner’s inaction lead to a “deluge” of lawsuits over the manipulation, which they contend he knew about as president of the New York Federal Reserve in 2008, Reuters reports.
Geithner did warn British authorities about the rigging but failed to inform the public in his capacity as either president of the New York Fed or as treasury secretary.
Documents released by the New York Fed earlier this year at the request of the House Financial Services Committee showed that Barclays Plc told Fed staffers as early as August 2007 about potential problems with Libor. Geithner said that he learned of the rigging in 2008, Reuters reports.
According to Grassley, Geithner’s failure to take action lead to emerging litigation that could clog U.S. courts with multi-billion dollar class action lawsuits and losses on interest rate swaps by local, municipal and state governments that could then lead to even more lawsuits.
The slew of lawsuits, Grassley and Kirk warn, could lead to higher taxes or a decrease in services for Americans while putting American investors at risk, according to Reuters.
Barclays Plc was the first bank to settle as part of the Libor manipulation, agreeing to pay a $453 million fine in June. The Royal Bank of Scotland Group Plc and Switzerland’s UB AG have also come under regulator scrutiny.