One thing's for sure: Regulators are on the hunt.
The New York Federal Reserve last week confirmed that U.S. Treasury Secretary Timothy Geithner sent a memo to British regulators in 2008 over concerns of banks manipulating Libor.
Geithner maintained that he and the Fed sent a long list of recommendations to the Bank of England and the British Bankers' Association, which oversees the Libor-setting process.
In light of the scandal, U.S. Federal Reserve chairman Ben Bernanke was questioned about the Fed's inaction regarding Libor manipulation at his testimony before Congress on Tuesday.
Bernanke also made clear that the Fed was not aware that Barclays was manipulating the rates for its own profit. Instead the Fed believed the bank was simply manipulating rates to maintain the appearance that everything was fine with the company (which surely wouldn't affect a bank's profit...).
Bernanke insisted the Fed followed up on the disclosures and that in cases like this there is not much more U.S. regulators can do than make suggestions.
Libor Manipulation Scandal: Possible U.S. CulpritsIt's hard to believe that the Fed did all it could do to prevent Libor manipulation. And if it couldn't prevent the scandal, the Fed certainly had the power and the knowledge of what was going on to keep it from ballooning to what it is today.
Jim Rickards, author of Currency Wars, thinks there is much more that could have been done to prevent the "largest financial scandal" he has ever seen.
He has gone as far as to say Geithner should be charged with aiding and abetting a crime. He explained that Geithner was aware of a crime, fraud, taking place, and did nothing to stop it.
Geithner is set to testify and face questions about the issue next week when he appears in front of the House Financial Services Committee.
So far U.S. banks have only felt a twinge of the possible repercussions that could stem from this mess.
JPMorgan Chase (NSYE: JPM) and Citigroup (NSYE: C) are the only two banks that have admitted to being under investigation, while other U.S. banks such as Bank of America (NYSE: BAC) remain under heavy suspicion.
The English VillainsConsidering that Libor is controlled by English regulators it would make sense that Barclays is not the only British wrongdoer in this scandal.
There is Bank of England's deputy governor Paul Tucker, who has been questioned about his correspondence with Barclays former CEO Bob Diamond.
Tucker said he pressed Barclays, HSBC Holdings (NYSE ADR: HBC), and the Royal Bank of Scotland (NYSE ADR: RBS) to urge the British Bankers Association (BBA) to carry out a more detailed review of Libor in 2008.
"We wanted to give the BBA the message that they shouldn't just do their normal annual review of Libor but do a much broader, global consultation of Libor and its governance," Tucker told lawmakers. "We decided to say to the banks that this broader review shouldn't be conducted at the level of the normal committee, which is desk level, but should be more senior. I called roughly the number two's and number three's at all the big sterling banks to say that."
This contrasts with a story Tuesday by the Associated Press concerning Bank of England's governor Mervyn King. King said the first he knew of any alleged wrongdoing during 2008 "was when the reports came out two weeks ago."
"We have been through all our records. There is no evidence of wrongdoing or reporting of wrongdoing to the Bank (of England)," King said.
King also said that the Federal Reserve of New York did not show him any evidence of manipulation or misreporting of Libor when they raised concerns in 2008.
King, speaking to a House Commons committee, said during the 2008 financial crisis there were concerns regarding what Libor was indicating about the health of banks, but not about Libor manipulation.
King was asked about Geithner's suggestion to "prevent accidental or deliberate misreporting" and "eliminate incentive to misreport."
"When you design any self-reporting scheme you have rules to prevent misreporting," King said. "That isn't the same as saying you've got evidence that there is misreporting, nor did the Fed or anyone else send us any evidence of misreporting."
Lastly, Britain's Financial Services Authority, which is their version of the U.S. Securities and Exchange Commission, is under speculation. They faced questioning on Monday from Parliament as to why regulators failed to respond to concerns about Libor manipulation going back to December 2007.
Members of Parliament accused the Financial Services Authority of not acting quickly enough and even the chairman of the British regulator, Adair Turner, admitted they had not dealt with the potential risks of Libor.
The Financial Services Authority is currently investigating several other global financial institutions about their role in the interest rate scandal.
For now all we know is that the Libor scandal is just picking up and it remains to be seen who will be punished the most, or even at all.
Related Articles and News:
Central Banks are the Problem
The Libor Manipulation Scandal Has Been Brewing for Years
Libor Manipulation Scandal Stings Barclays and Parliament
BOE's Tucker Says He Encouraged Banks to Push for Libor Review
Bank of England: no hint of LIBOR fraud in 2008