July 9, 2012
House Banking Lawmakers: Use Hearing to Explore LIBOR Scandal
Statement of Bartlett Naylor, Financial Policy Advocate, Public Citizen
Members of the Subcommittee on Capital Markets and Government-Sponsored Enterprises for the U.S. House Financial Services Committee should take advantage of the July 10 hearing on Wall Street reform to explore the impact of massive fraud in the London InterBank Offered Rate (LIBOR), the widely used interest rate index. LIBOR is set by 18 bankers who submit rates daily. As is now well-known, UK-based Barclays admitted to fabricating its rates more than 250 times over five years, and implicated other firms in the manipulation.
Rep. Scott Garrett (R-N.J.), chairman of the subcommittee, will serve Americans if he pivots from the committee’s tired routine of blaming reform of reckless bankers for whatever ails the nation to the pressing scandal revealed by U.S. regulators involving LIBOR. LIBOR affects $800 trillion worth of deals, virtually every credit contract Americans sign.
With experts from leading trade associations, the subcommittee can help shed light on the specific impacts on individuals and businesses when the integrity of this central benchmark becomes violated.
Helpfully, the subcommitteehas invited a witness from the Securities Industry and Financial Markets Association (SIFMA), which until last week was chaired by Barclays Chief Operating Officer Jerry del Missier. In the wake of the $450 million fine for Barclays, del Missier resigned, along with the company’s CEO and chair (though the chair has been reinstated). SIFMA members include all the banks that set LIBOR.The subcommittee can and should explore what led to del Missier’s resignation.
Several questions Public Citizen believes should be asked are:
- Does SIFMA maintain a code to which its board members must adhere?
- Are they instructed against illegal conversations?
- Why did SIFMA not release a statement deploring the LIBOR fraud?
- Does SIFMA believe Wall Street miscreants should be held personally liable for frauds?
- Should they be jailed?
- Should banks that commit fraud and illegally manipulate LIBOR be subject to criminal penalties?
House Republicans long ago established that their Wall Street campaign donors object to Wall Street reform. Another hearing of self-serving jeremiads about reform and the need to trust bankers to serve customers will simply embarrass. We urge the subcommittee to use this opportunity to explore the LIBOR issue that has infected the credit contracts of U.S. consumers.
Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C. For more information, please visit www.citizen.org.