New York Fed Release Full Response On Lieborgate

Tyler Durden's picture

Just out from the New York Fed. We are going through the source data

New York Fed Responds to Congressional Request for Information on Barclays - LIBOR Matter

Attached are materials related to the actions of the Federal Reserve Bank of New York (“New York Fed”) in connection with the Barclays-LIBOR matter.  These include documents requested by Chairman Neugebauer of the U.S. House of Representatives, Committee on Financial Services, Subcommittee on Oversight and Investigations. Chairman Neugebauer requested all transcripts that relate to communications with Barclays regarding the setting of interbank offered rates from August 2007 to November 2009. Please note that the transcript of conversations between the New York Fed and Barclays was provided by Barclays pursuant to recent regulatory actions, and the New York Fed cannot attest to the accuracy of these records. The packet also includes additional materials that document our efforts in 2008 to highlight problems with LIBOR and press for reform. We will continue to review our records and actions and will provide updated information as warranted.

An important and longstanding role of the New York Fed Markets Group is to monitor a wide range of markets for the purpose of understanding and reporting on market conditions and market functioning.  Each day, analysts gather information on a nearly continuous basis by speaking with market participants and asking both general and specific questions about prevailing market conditions, the magnitude of movements in prices or the volume of activity, or any other issues in the markets.  These analysts also review large amounts of market commentary they receive via individual and mass-distribution emails, and review a wide variety of data feeds.

Following the onset of the financial crisis in 2007, markets monitoring played a critical role by identifying the nature and location of rapidly mutating financial stress. Markets Group analysts engaged with market participants – including staff at Barclays - to better understand the nature of market stress.  In the course of these exchanges, market participants reported dysfunction in the form of illiquidity and anomalous pricing across many different markets.

Among the information gathered through markets monitoring in the fall of 2007 and early 2008, were indications of problems with the accuracy of LIBOR reporting. LIBOR is a benchmark interest rate set in London by the British Bankers Association (“BBA”) under the broad jurisdiction of the UK authorities, based on submissions by a panel of mostly non-US banks. The LIBOR panel banks self-report the rate at which they would be able to borrow funds in the interbank money market for various periods of time. As the interbank lending markets dried up these estimates became increasingly hypothetical.

Suggestions that some banks could be underreporting their LIBOR in order to avoid appearing weak were present in anecdotal reports and mass-distribution emails, including from Barclays, as well as in a December 2007 phone call with Barclays noting that reported “Libors” appeared unrealistically low.

As market strains intensified in early 2008, to better understand the nature and extent of the potential problems with LIBOR, analysts in the Markets Group gathered additional and more in-depth information.  As part of this broad effort, on April 11, an analyst from the Markets Group queried a Barclays employee in detail as to the extent of problems with LIBOR reporting.

The Barclays employee explained that Barclays was underreporting its rate to avoid the stigma associated with being an outlier with respect to its LIBOR submissions, relative to other participating banks.  The Barclays employee also stated that in his opinion other participating banks were also under-reporting their LIBOR submissions. The Barclays employee did not state that his bank had been involved in manipulating the rate for its own trading advantage. Immediately following this call, the analyst notified senior management in the Markets Group that a contact at Barclays had stated that underreporting of LIBOR was prevalent in the market, and had occurred at Barclays.

That same day - April 11, 2008 - analysts in the Markets Group reported on the questions surrounding the accuracy of the BBA’s LIBOR fixing rate in their regular weekly briefing note.  The briefing note cited reports from contacts at LIBOR submitting banks that banks were underreporting borrowing rates to avoid signaling weakness. In accordance with standard practice for briefing notes produced by the Markets Group, this report was circulated to senior officials at the New York Fed, the Federal Reserve Board of Governors, other Federal Reserve Banks, and U.S. Department of Treasury. The briefing note is included in this packet.

Five days later, the first media report on problems with LIBOR emerged.  From this point onwards the notion that banks were underreporting LIBOR in order to avoid signaling weakness was widely discussed in the press and in market commentary.

In late April and into May 2008, New York Fed officials met to determine what steps might be taken to address the problems with LIBOR. The New York Fed also acted to brief other US agencies. On May 1 Tim Geithner, then President of the New York Fed, raised the subject at a meeting of the President’s Working Group on Financial Markets (“PWG”), a body that comprised the heads of the principal regulatory agencies in the US, chaired by Treasury. On May 6 New York Fed staff briefed senior officials from the U.S Treasury in detail.

On May 20 the Markets Group sent a further report on problems with LIBOR to the broad set of senior officials who receive its regular analysis. The report is included in this packet. On June 5, New York Fed officials also briefed an interagency working group comprised of staff from the PWG. The presentations given to Treasury and to the PWG staff are included in this packet.

New York Fed officials also met with representatives from the British Bankers Association to express their concerns and establish in greater depth the flaws in the LIBOR-setting process.  The New York Fed analysis culminated in a set of recommendations to reform LIBOR, which was finalized in late May.  On June 1, 2008, Mr. Geithner emailed Mervyn King, the Governor of the Bank of England, a report, entitled “Recommendations for Enhancing the Credibility of LIBOR.”

Among the recommendations were specific proposals to improve the integrity and transparency of the rate-setting process, including the suggestion that LIBOR submissions should be subject to internal and external audit of the accuracy of the reporting by banks.  A copy of this email and the memorandum is included in this packet.

Shortly afterwards, Mr. King confirmed to Mr. Geithner that he had transmitted the New York Fed recommendations to the British Bankers Association soon afterwards. After putting forward recommendations for LIBOR reform to the UK authorities, the New York Fed continued to monitor for problems related to LIBOR.

As is clear from the work culminating in the report to Mr. King of the Bank of England, the New York Fed helped to  identify problems related to LIBOR and press the relevant authorities in the UK to reform this London-based rate.

New York Fed Materials

All files in PDF format pdf

April 11, 2008: MarketSOURCE Weekly Market Review

May 6, 2008: Slide Deck of Presentation to U.S. Treasury, "Recent Developments in Short-Term Funding Markets"

May 20, 2008: MarketSOURCE report “Recent Concerns Regarding LIBOR’s Credibility”

June 1, 2008: Timothy F. Geithner e-mail to Mervyn King, copying Paul Tucker, with attached “Recommendations for Enhancing the Credibility of LIBOR”

June 3, 2008: Mervyn King e-mail to Timothy F. Geithner

June 5, 2008: Slide Deck of Presentation to the Interagency Financial Markets Group Meeting "Market Concerns Regarding LIBOR"

Materials provided by Barclays

Redacted by Barclays
All files in PDF format

August 28, 2007: mass distribution e-mails:

  • 8:01 a.m. mass-distribution e-mail from Barclays.
  • 11:27 a.m. “reply all” response to the original e-mail from Barclays.

September 3, 2007: mass distribution e-mail from Barclays

September 26, 2007: mass distribution e-mail Barclays

October 3, 2007: e-mail from Barclays

November 29, 2007: mass distribution e-mail from Barclays

December 17, 2007: transcript of phone call between Barclays and New York Fed Markets Group analyst

March 27, 2008: mass distribution e-mail from Barclays

April 11, 2008: transcript of phone call between Barclays employee and analyst in the Markets Group of the New York Fed

October 10, 2008: transcript of phone call between Barclays employee and analyst in the Markets Group of the New York Fed

October 24, 2008: transcript of phone call between Barclays employee and analyst in the Markets Group of the New York Fed

October 27, 2008: transcript of phone call between Barclays employee and analyst in the Markets Group of the New York Fed

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Mr Lennon Hendrix's picture

No one tells the Federal Reserve what to do.  Not the Congress, not even the President of the United States.

- Allen Greenspan

They think they are all powerful because we can't vote them out, but we can.  Take back the money supply, and you will see their power vanish.

Buy silver!

LawsofPhysics's picture

Correct.  The "statement" might as well be; "We do what the fuck we want to because we own your ass if you use dollars for anything."


Let's see how that plays out for dollars and dollar-denominated paper.

redpill's picture

Short version: they knew and did nothing.

Snakeeyes's picture

Tiny Tim Geithner sent a memo to Barclays. Wow, what a regulator!!!!!!!!!!!!!111

cynicalskeptic's picture

Standard CYA - it's called 'playing civil service'   You write a memo saying you have concerns and request that 'action be taken' but otherwise do NOTHING.  If you're really worried that at some point serious shit will be hitting the fan you maybe write a follow up memo but again do NOTHING of substanxce.  You do nothing to rock the boat, NOTHING to force any real action to address the problem.  After all, the LAST thing Timmy wanted was to put the banks in a worse spot than they already were.  You do NOT breathe heavily, much less blow hard,  around a house of cards.

The ONLY point behind Timmy's memos was exactly what has just happened.  He can now claim he alerted appropriate parties (after all it was not HIS job to fix this problem) - it's not HIS fault if the Bank Of England (Lapdog to the Fed) did nothing.



DaveyJones's picture

I hear the SEC manipulates more than abstract digits as they sit at their computer

a picture of the whole system really

101 years and counting's picture

At this point, no one even cares. The whole fucking system is fraudulent and everyone knows it.  Corzine stole 1.2 billion and he still gets to enjoy his freedom.  What a fucking joke this country is.  The entire world hangs on how the SPX does today. 

Cognitive Dissonance's picture

Plausible deniability..........bitches!

"And if you don't accept this explanation.........well, tough luck bro because WE are the Fed. Make us stop printing money, rigging markets and manipulating data to our (TBTF) owner's advantage. Go ahead, I dare you.

Yeah, I thought so."

Manthong's picture

So the fix will be a few bad apples will get clawed, canned or locked up for a short while, levy a few hundred million in fines as punishment for trillions of dollars in fraud and a shrug of the shoulders while saying or implying “There’s not much more that can be done without collapsing the whole system.. so suck it up".

SheepDog-One's picture

Come out smelling like a rose I'm sure.

mrktwtch2's picture

mean while in other news..katie is free!!

Robot Traders Mom's picture

Any 'valuable' document has either been deleted or shredded.


I would trust O.J. on a desert island with my girlfriend before I believed anything out of the Fed.

DaveyJones's picture

Actually OJ is an astute analogy for the Fed. An icon, an actor, a liar and a murderer

Dumpster Fire's picture

Well except that OJ is in jail.

DaveyJones's picture

but the analogy continues. when he had the most money, he avoided jail. As he lost money and contracts and influence..... 


smlbizman's picture

and didnt we trade him back to the blacks in exchange for collen powel and condi rice?...

DaveyJones's picture

so a murderer of 2 for murderers of 2 million.    Not bad

yrad's picture

Seems like a whole lot of "talking" about possible this, and reported that. They act like all this talking was them "staying on top of the situation" while letting the fleecing continue. WTF...

same old story's picture

Yawn.  The fox has released some information on the hen house.   Anything explosive long shredded, and G about to step down soon, so he will fade into the shadows. Whatever comes of this is what they plan to come of it - just another piece on their chessboard, being moved for reasons only Watson could calculate.  The rest of us can guess, and think we might even know, but I am sure they will even surprise those that think they know where this all leads.  

Meesohaawnee's picture

Real statement from fed. "You muppets really think anyone  will be punished?!! haha. Look at JPM stock price  today you suckaas! We back up crime. We prove it pays. Nobody gets punished. JPM is perfect expample. You dare short we will crush you. We have a short ban implemented. You couldnt drum up enough bad data. We will turn the tape green. If you think this is market thing again" signed. the fed.

Not Too Important's picture

A big question I have is why is all this 'deeply criminal' information being released unopposed by the most secretive institution in the world? We can't get Holder to release info on Fast and Furious, but the NYFed is releasing information that may ultimately destroy the global financial system as we know it, with full cooperation of the Bank of England?

This looks like the beginning of the ultimate destruction of the system, by the very people who run the system.

Heads up, gentlemen. We're about to get screwed like we've never been screwed before.

Shizzmoney's picture

Maybe in the London Olympics they can add a new medal event: "The Central Bank Under-the-Bus Toss"

If the NY Fed was so confident it didn't do anything wrong.....maybe it can be confident enough to pass an audit, no?

<cue laughter>

MStickle's picture

So Timmy was aware and concerned but didn't follow up . . . presumably because he was too busy working on his tax returns?????


Nage42's picture

So, in summary, everybody knew everything for a long time back, but did nothing.

So why make a stink _now_?  What specific timing is required to distract the ADD crowd for just long enough to do some kind of shell game somewhere?  What even _bigger_ crime is being committed as we watch the circus ensue?

Well, _that's_ the question we should be asking in my oppinion.


SmoothCoolSmoke's picture

How did they have time to release anything busy as they have been manipulating the markets?

jules from aus's picture

the SEC has/had regulatory authority to step in at anytime, even where 'foreign' and off shore banks are involved... but come on, a bank in the UK still goes under the same colors in the US... but i guess, Timmy was handling it with Mervyn, right

rosiescenario's picture

Relax everyone, Holder will dig into this and all will be revealed....

silverserfer's picture

this is where Bernanke say " so your on to me well, prepare to be destroyed" and peels back his face and turns into a 100 foot tall cthulu monster.

MrBoompi's picture

"Your honor, the only reason I stole that money is because I was afraid being broke would be interpreted as a sign of weakness.  I'm sure you understand."