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Sherrod Brown questions Fed Chairman Bernanke’s authority in Libor scandal

Sherrod Brown

Sen. Sherrod Brown (D-Ohio) recently questioned Federal Reserve Chairman Ben Bernanke’s statements that he did not have the authority to address problems related to the London interbank offered rate, commonly known as Libor.

Brown said in a Wednesday letter to the New York Federal Reserve’s president and director of bank supervision that “it is difficult to accept the argument that the Fed has no authority to address this problem,” Reuters reports.

The Fed is responsible for the oversight of large banks, including Barclays, which recently paid a record $453 million to British and U.K. regulatory authorities for its participation in the Libor-rigging scandal.

Brown said that the Fed’s policies clearly require banks to establish controls, adding that despite these required policies, “it appears Barclays escaped any meaningful supervision over its U.S. activities,” according to Reuters.

In July, it was revealed that the New York Fed may have known about Libor manipulation as early as 2007. Treasury Secretary Timothy Geithner, who headed the New York Fed at that time, has been criticized for his actions after learning of potential Libor problems. Brown asked in the letter whether the New York Fed had launched investigations into Barclays’s system controls after it learned of Libor rigging.

The House Financial Services Committee is currently waiting for the New York central bank to disclose communications with Libor-setting banks that occurred as early as August 2007. The bank has already disclosed documents that reveal Barclays had told Fed employees that the bank had been submitting artificially low rates.

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