Former financial regulator Sheila Bair says that Treasury Secretary Timothy Geithner was primarily concerned with shoring up Citigroup and other banks in his response to the financial crisis, rather than holding those banks accountable.
Bair went on a media tour on Tuesday to promote her new book, "Bull by the Horns," about the government's response to the financial crisis, which she experienced firsthand as a top financial regulator. Bair criticized Geithner in the book, and she aired some of that criticism in an interview with the Wall Street Journal on Tuesday.
"He was in constant communication with [Citigroup CEO] Vikram Pandit throughout that whole process, and I felt like he and Vikram were figuring out what they were going to do and then trying to jam it on me," said Bair, who served as chair of the Federal Deposit Insurance Corporation (FDIC) between 2006 and 2011. "I do think that a lot of the policy decisions that were made were made through the prism of what Citigroup needed."
Bair said that most big banks did not need the Troubled Asset Relief Program (TARP), the government's bank bailout in 2008, but the government forced TARP on all of them partly because Citigroup needed it. "It worked horrible reputational damage on everyone," Bair said of TARP.
Some TARP defenders say granting TARP funds across the board was necessary to avoid a loss of trust in specific banks. Citigroup was one of the more vulnerable banks during the financial crisis, since it held a large number of toxic mortgage-backed securities. The government gave Citigroup multiple bailouts.
"He viewed these institutions as entities that needed to be taken care of," Bair said of Geithner, adding he thought the banks "needed to be taken care of and that this was just a big systemic event, and we needed to protect them -- whereas I wanted them to have accountability. They had caused this."
"If you view the banks themselves as victims just of the larger crisis, then you're going to just try to help them however you can, and I think that was his guiding philosophy," she added.
Geithner declined to comment to the Wall Street Journal after the interview.
This is not the first time that Bair has criticized Geithner. She told CNBC in July that the Federal Reserve Bank of New York should have done more to investigate the Libor rate-rigging scandal in 2008, when Geithner served as the New York Fed's president. "It looks like they had pretty explicit notification of some very bad behavior, and I don't understand why they didn't investigate," she said. "They did have authority to do that."
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Barclays Begins Manipulating Libor Rate
Barclays allegedly began manipulating the Libor rate in 2005 and allegedly stopped manipulating Libor in 2009, <a href="http://www.businessweek.com/news/2012-07-11/barclays-u-dot-s-dot-say-libor-probe-doesn-t-affect-2010-case" target="_hplink">according to <em>Businessweek</em>.</a> But other reports indicate that <a href="http://www.huffingtonpost.com/2012/07/09/libor-scandal-manipulation-spanned-decades_n_1658696.html" target="_hplink">Libor fixing may have spanned decades.</a>
Barclays Employee Admits Libor Is Being Rigged
A Barclays employee told an analyst from the New York Fed's Markets Group that Barclays was indeed using false information to set the interest rate on April 11, 2008, according to <a href="http://www.huffingtonpost.com/2012/07/13/geithner-libor_n_1671211.html" target="_hplink">recently released Federal Reserve documents</a>. "We know that we're not posting, um, an honest LIBOR," the Barclays employee told the New York Fed's Fabiola Ravazzolo, according to a <a href="http://www.newyorkfed.org/newsevents/news/markets/2012/libor/April_11_2008_transcript.pdf" target="_hplink">transcript of the phone conversation.</a>
Geithner Privately Expresses Concern Over Libor's Integrity
In June 2008, then-president of the New York Federal Reserve Timothy Geithner sent a memo to British banking authorities expressing concern over the "integrity and transparency" of the key interest rate. Geithner did not inform British regulators that a Barclays employee admitted that Libor was being rigged, <a href="http://in.reuters.com/article/2012/07/25/geithner-libor-idINL4E8IP17720120725" target="_hplink">according to Reuters.</a>
Banks Ripped Off The Government During Bailout
During the 2008 Financial Crisis, the U.S. government lent money to cash strapped banks and AIG using Libor to determine interest, <a href="http://www.huffingtonpost.com/mark-gongloff/timothy-geithner-libor_b_1701904.html" target="_hplink">Treasury Secretary Tim Geithner told Congress on July 25, 2012.</a> The artificially low rate saved the banks and AIG billions, while costing tax payers the same amount.
Peter Mandelson: Barclays CEO The "Unacceptable Face Of Banking"
In April 2010, then-UK Business Secretary Peter Mandelson told the<em>Times of London</em> that then-CEO of Barclays, Robert Diamond, was "the unacceptable face of banking" after the bank announced that its CEO would receive a bonus of 63 million pounds, <a href="http://news.sky.com/story/771318/mandelson-attacks-bank-boss-for-63m-salary" target="_hplink">Sky News reports.</a> Mandelson also told <em>the Times</em> that banking bosses were expected to act with "a bit more modesty, a bit more humility" than Diamond's behavior.
Barclays Fined $450 Million
On June 27, Barclays disclosed to its shareholders that it would be fined $450 million by U.S. and U.K. regulators for conspiring to manipulate the Libor rate between 2005 and 2009, <a href="http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9374118/Barclays-libor-fixing-scandal-timeline.html" target="_hplink"><em>The Telegraph</em> reports</a>.
Barclays Chairman Resigns
On July 2, <a href="http://group.barclays.com/news/news-article/1329925915887/navigation-1330349038798" target="_hplink">Barclays announced</a> that it's Chairman, Marcus Agius, would be resigning in the wake of the Libor rigging scandal. In the official resignation letter, Mr. Agius stated that the Libor rigging constituted "unacceptable standards of behaviour within the bank." He went on to say: <blockquote>As Chairman, I am the ultimate guardian of the bank's reputation. Accordingly, the buck stops with me and I must acknowledge responsibility by standing aside."</blockquote>
Robert Diamond Resigns As Barclays CEO
On July 3, Robert Diamond resigned as Barclays CEO, <a href="http://www.washingtonpost.com/business/barclays-boss-diamond-quits-with-immediate-effect-latest-scalp-of-price-fixing-scandal/2012/07/03/gJQAFeDxJW_story.html" target="_hplink"><em>The Washington Post</em> reports.</a>
Marcus Agius Re-Appointed As Barclays Chairman
On July 3, <a href="http://www.newsroom.barclays.com/Press-releases/Board-changes-907.aspx" target="_hplink">Barclays announced</a> that Marcus Agius would be reappointed as the bank's full-time Chairman following the resignation of Robert Diamond.
Did The Bank of England Encourage Barclays?
On July 3, Barclays released phone records between CEO Robert Diamond and the Deputy Governor of the Bank of England, Paul Tucker, that indicate that the BoE executive encouraged Barclays to manipulate the Libor rate, <a href="http://online.wsj.com/article/SB10001424052702304141204577506602345146644.html" target="_hplink"><em>The Wall Street Journal </em>reported.</a>
Diamond Goes Before Parliament
On July 4, Bob Diamond told a U.K. parliamentary panel that he believes other major banks were involved in Libor rigging, <a href="http://online.wsj.com/article/SB10001424052702304141204577506602345146644.html" target="_hplink"><em>The Wall Street Journal</em> reports.</a> He also stated that fear of being nationalized during the 2008 Financial Crisis contributed to its actions.
Bob Diamond Loses His $31 Million Bonus
Barclays CEO Bob Diamond agreed to forgo an extra $31 million bonus, the bank announced on July 10, according to the <a href="http://online.wsj.com/article/SB10001424052702303343404577518263465180508.html" target="_hplink">reports <em> Wall Street Journal</em>.</a> Diamond will still net his salary and pension for a year, which is worth about 2 million pounds.
At Least 16 Banks Under Investigation
At least 16 banks were reportedly under investigation for Libor rigging as of July 11, <a href="http://www.huffingtonpost.com/2012/07/11/libor-rate-scandal_n_1664737.html#slide=1212066" target="_hplink">according to Reuters.</a> In an internal bank memo circulated on July 13, Barclays executive committee told employees that, "As other banks settle with authorities, and their details become public, and various governments' inquiries shed more light, our situation will eventually be put in perspective," <a href="http://business.time.com/2012/07/16/libor-rigging-what-the-regulators-saw-but-didnt-shut-down/" target="_hplink"><em>TIME Magazine</em> reports.</a>
EU Weighs Criminalizing Rate Rigging
On July 25, <a href="http://www.huffingtonpost.com/2012/07/25/eu-criminalizing-rate-rigging_n_1701248.html?utm_hp_ref=business" target="_hplink">the European Union proposed making the rigging of international interest rates a criminal offense.</a>