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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (13236)	6/28/2012 2:38:43 PM
From: Challo Jeregy	Read Replies (2) \| Respond to of 33421

OT: I'm well, thanx. Yourself? I do check out busab occasionally. I see your mom is doing well also. I was sad to see mph and some others are no longer with us. Man, I can remember when JXN was born!

To: Jorj X Mckie who wrote (13236)	7/22/2012 8:42:00 AM
From: John Pitera	1 Recommendation Read Replies (1) \| Respond to of 33421

Tim Geithner and Libor The Bank of England says the New York Fed raised little alarm Updated July 20, 2012, 6:46 p.m. ET Well, did U.S. regulators sound the alarm on the Libor rate-setting scandal, or not? You sure can't tell from the conflicting stories this week by Bank of England Governor Mervyn King and U.S. Treasury Secretary Timothy Geithner. Mr. King, who said he first learned of "fraudulent behavior" when the Barclays settlement was announced last month, told a British Parliamentary committee Tuesday: "At no stage did he [Mr. Geithner] or anyone else at the New York Fed raise any concerns with the Bank that they had seen any wrongdoing." Mr. Geithner, who led the New York Federal Reserve before becoming Treasury Secretary in 2009, then told CNBC Wednesday, "We brought it to the attention of the British and took the exceptional step in putting in writing to them a detailed set of recommendations that revealed the extent of the concerns in that context." So who's really on first? Mr. Geithner is right that he informed the Bank of England, as far as "that context" goes, which isn't very far. A fair reading of the New York Fed's own documents released last week suggests that Mr. King is right that Mr. Geithner's concerns at the time were far from sounding alarms. A June 1, 2008 email to Mr. King from Mr. Geithner says they "spoke briefly" about Libor at a central bankers' meeting in Basel, Switzerland, and afterward that Mr. Geithner had his staff prepare a two-page list of recommendations, in which he said he "would welcome a chance to discuss" with his British counterpart. This isn't exactly calling in the FBI to stop what regulators and their media Boswells are now describing as the financial crime of the century. Mr. Geithner and the rest of the Federal Reserve were so unalarmed about the claims of inaccurate Libor rates that *they even continued to use Libor as a benchmark.* In September 2008, the New York Fed extended an $85 billion line of credit to rescue AIG. *The interest rate for that loan was based on the three-month Libor rate, plus 8.5%. Two months later, the Fed restructured the rescue package, lowering the interest rate to Libor plus 3%. And so mild was its concern that when the Fed set up the Term Asset-Backed Securities Loan Facility, or TALF, in November 2008, it set the interest rate for the emergency program on the one-month Libor rate, plus a premium. That program, which eventually lent $1 trillion to banks and hedge funds, was administered by none other than the gumshoes at the New York Fed. All of this happened after the New York Fed had briefed the Treasury and regulators in Washington about reports it had received—often from the banks themselves—that banks were fudging their Libor submissions. No wonder, as the Bank of England's number No. 2 Paul Tucker recently put it, "alarm bells" didn't go off. None of this is to say that Libor was trouble-free or that the banks should get a pass for misrepresenting their borrowing costs through Libor. But it does put into context the regulatory atmosphere in which the banks were operating, as well as raising questions about how large a scandal this really is. On the evidence currently available, Mr. Geithner and his fellow regulators were inclined at the time of the crisis in 2008 to treat understated Libor rates as a minor issue*—a financial foot fault. But now that the issue has stirred a political uproar and become a proxy for all banking sins, the regulators are joining the denunciations and descending from their parapets to shoot the wounded as if they had been on the front lines all along. So which is it? The regulators can't have it both ways.