By Jim Puzzanghera and Marc Lifsher
July 16, 2012, 2:37 p.m.
WASHINGTON — A House committee is launching a bipartisan investigation into allegations that large banks rigged a key interest rate and plans to question Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Timothy F. Geithner at upcoming hearings.
At the same time, officials at the country’s largest public pension fund, the California Public Employees’ Retirement System, said Monday they were examining the impact of the rate-fixing scandal and might seek damages if they could be calculated.
“Once again, the financial services industry demonstrated that it cannot be trusted to make decisions in the long-term interests of investors,” said CalPERS Chief Investment Officer Joseph Dear.
House Financial Services Committee Chairman Spencer Bachus (R-Ala.) and the panel’s top Democrat, Rep. Barney Frank (D-Mass.) announced their probe on Monday, joining investigations by regulators.
The lawmakers said the committee would focus on the allegations that banks tried to manipulate the London interbank offered rate, known as LIBOR, a key interest rate that helps determine borrowing costs for consumers and corporations.
The investigation will look at the potential impact of such manipulation on consumers and the financial system, as well as how U.S. regulators oversee the rate, Bachus and Frank said in a memo to committee members.
They said lawmakers on the panel would have “an initial opportunity to explore issues related to LIBOR” when Bernanke makes his semiannual appearance before the committee Wednesday to discuss monetary policy and the state of the U.S. economy.
Committee members will get a chance to question Geithner on the issue at a previously scheduled hearing on July 25 about the Dodd-Frank financial reform law.
Geithner was president of the Federal Reserve Bank of New York in 2008 when it learned from a Barclays employee that the British investment bank was under-reporting its borrowing costs to lower the benchmark LIBOR rate, according to documents the Fed released last week. The employee said other large banks were under-reporting their borrowing costs and Barclays didn’t want to be an outlier.
The New York Fed regulates Barclays’ U.S. operations. The documents also showed that Geithner made recommendations to the Bank of England, the main regulator of Barclays, “to improve the integrity and transparency of the rate-setting process,” the New York Fed said Friday.
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