WASHINGTON (7/18/12)--The House Financial Services Committee is expected to soon begin an investigation into alleged manipulation of the London interbank offered rate (LIBOR) and other interest rates.
The Los Angeles Times, The Wall Street Journal and other publications reported this week that the committee's chairman, Rep. Spencer Bachus (R-Ala.), and its ranking minority member, Rep. Barney Frank (D-Mass.), told their committee colleagues they plan to hold hearings on LIBOR distortion in the near future. Potential legislative actions will likely be discussed during those hearings, The Journal reported.
Committee members could also touch on the subject when Federal Reserve Chairman Ben Bernanke delivers his semi-annual monetary policy report today.
LIBOR is used by financial institutions to set interest rates on a variety of financial products, including mortgages, student loans and credit cards. LIBOR for the U.S. dollar is based on information provided by 18 global financial institutions, including several U.S. banks.
British bank Barclays PLC recently admitted that some of its employees between 2005 and 2009 conspired with employees of other financial firms to manipulate LIBOR and the Euro Interbank Offered Rate to support their own financial positions. The firm has been fined by the U.S. Department of Justice, the U.S. Commodity Futures Trading Commission, and the United Kingdom's Financial Services Authority.
Governments and authorities in several countries are investigating big banks for any role in potential interest-rate-manipulation schemes, and the relationships between financial regulators and some large firms are also being scrutinized.
The Senate Banking Committee is also investigating LIBOR manipulation, and will hold hearings on the issue this month.
The LIBOR issues will further sully the reputation of big banks, but are unlikely to have a significant impact on credit unions, Credit Union National Association Chief Economist Bill Hampel said recently. (See July 16 News Now story: LIBOR issues unlikely to affect CUs: CUNA.)