Geithner foresight six recommendations:

Be sent in this e-mail of the Bank of England Governor Mervyn King, Geithner and put forward six recommendations to strengthen the libor quote reliability in addition to respect the concerns of the New York Fed to be manipulated libor, including banks need to establish a credible offer program to increase the scale and proportion of Bank of America in the libor sample, add a second USD libor fixing for the U.S. market, the transaction size is specified, only symbolic and trading volume month libor quote, the elimination of the investment bank lied about libor motivation.

Six reform proposals based on the 2007 subprime crisis, the New York Fed has realized that the libor may have been manipulated. Memories of an investment bank, told reporters April 2008, the New York Federal Reserve through an advisory body to the Barclays, libor offer members inquired the libor offer details, but the reply was told that other investment banks also depress libor depress Barclays did not want to as "alien."

"New York Fed was worried about, libor artificially low could allow an investment bank to get some kind of derivatives trading advantage." He disclosed that the investment bank gold derivatives trading, gold, the dollar swap gold lending rate (GOFO) decided to swap the success or failure of fluctuations GOFO movements generally follow the libor libor has been artificially reported, means that investment banks can the lower GOFO mortgage gold borrowing dollars, turned to short selling gold to buy up dollars to arbitrage. "CFTC2008 survey found that investment banks once accounted for 67% of the net short position in COMEX gold futures in July to November 2008. This is most of the gold derivatives positions.

CFTC during the investigation, the New York Federal Reserve has some thinking to cope with the libor be manipulated solution. Even in May 2008, Geithner once in the head of the U.S. Treasury Department's financial markets Working Group (PWG) meeting problems libor being manipulated.

Although the Bank of England governor directly Geithner "the recommendations to improve the reliability of libor forwarded to the BBA, but the results point of view, the reform proposals did not become a reality. Geithner is now urgent need to face the anger of the United States Senator.

"If the New York Fed in 2007 has been found libor be manipulated, why until the end of 2009, initiated the investigation for investment banks to manipulate the libor?" Investment banking sources, precisely this question, the number of U.S. senators have asked the New York Fed provided with Barclays in 2007 communication a copy of the November 2009 August libor quote why, audit the New York Fed failed to prevent libor manipulation.

Currently, the U.S. Senate Banking Committee has asked Geithner and Federal Reserve Chairman Ben Bernanke "ready" to answer senators' questions.

Dark won the Eurodollar market, the right to speak

Geithner to improve the the libor reliability recommendations are "sealed" for the past four years, in the eyes of these investment bankers, is because the the libor reform proposal touches the common interests of the European investment bank. Geithner in Elimination of the motives of the bank lied about libor terms of recommendations, BBA start with the different banks collection, libor offer, the decision final interest rate is "random" to elect one (offer) a subset of, to prevent a number of investment banks "joint" manipulation offer.

Part of the large European investment bank that this proposal can not be comprehensively and objectively reflect the status of all libor quote, but increased libor be the possibility of manipulation. "The investment bank said, some investment banks are even worried that Bank of America, Geithner" to increase the libor sample size and proportion of "proposal, it will damage the original voice of the European investment banks in the Eurodollar market.

"They've been their own Euro-dollar libor market financing rate." He disclosed that In particular, the sub-prime crisis, the European Bank Authority (EBA) requirements of the euro area banking institutions to the core tier one capital ratio to 9%, but considering the trapped in sub-prime crisis, the European banking industry financing difficulties, including BNP Paribas, Germany's Commerzbank, Scotland Royal Bank decided to take "liability management" (LM) scale, that is higher than the market interest rate (linked to libor) to sell up to 1000 billion euros in subprime asset-backed bonds at the same time, to sign a repurchase of subordinated bonds in the agreement, linked to libor and the benchmark interest rate spread trading range to meet the new capital of the banking sector regulations.

However, LM, or other interest rate swap transactions, the investment bank that can be tolerated (libor and the benchmark interest rate) spreads the maximum fluctuation range is generally not more than 100 basis points. But the chosen sub-prime crisis was leading to global dollar liquidity dried up, so that both spreads jumped over 100 basis points from 15-30 basis points before the outbreak of the subprime mortgage crisis.

"As far as I know, is the European investment bank joint boycott of several U.S. investment banks, Geithner proposed libor reform proposals can not be honored." The aforementioned investment bankers said.

Morgan Stanley banking analyst Betsy Graseck and Huw van Steenis latest release of the report pointed out that the investment banks to manipulate Libor for the period 2006-2009, each trading day only "to" lower the Libor basis points, investors will loss of nearly $ 6,000,000,000, this a certain degree into the profits of investment banks.

With Barclays admitted manipulation of libor and pay large fines, it quickly reached a settlement agreement with the CFTC agreed to take include encouraging BBA libor quote transparency, offer members the actual transaction to submit, libor reference interest rate offer by the internal management, the creation of firewall to prohibit the offer members and derivatives traders to communicate information, the reliability of the introduction of an independent third party Barclays libor rate-setting process, the annual audit of the six measures to improve the libor quotations and formation mechanism.

Geithner had proposed to increase the libor samples Bank of America, scale and proportion, "added for the U.S. market and the second dollar libor fixing price proposal is not involved.


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