Time to tear down that statue of Tim Geithner

The Washington Post reports that when he was head of the Federal Reserve Bank of New York, Tim Geithner failed to communicate in key meeting with top regulators that Barclays, the British bank, had admitted to Fed staffers that it was rigging Libor — the benchmark interest rate. As a result, regulators at the Commodity Futures Trading Commission and the Justice Department worked largely without the Fed’s help to build a case against Barclays.

Geithner claims that he sounded the alarm about Libor four years ago and that the New York Fed did everything in its power to address the matter. He told Charlie Rose that “we moved quickly to address [the problem] and make sure we brought it to the attention of U.S. regulatory agencies.” But, says the Post, documents released by the New York Fed show that the agency chose to focus on structural problems with Libor rather than help to bring corrupt actions at Barclay to light. And the governor of the Bank of England testified before parliament that at no stage did Geithner or anyone else at the New York Fed raise any concerns with the Bank that they had seen wrongdoing.

Moreover, even after being told that Barclays was rigging Libor, the Fed used it as a benchmark to determine how much insurance AIG would pay back to the government during the bailout. The measure also was used to set the interrest rate for an emergency lending program called the Term Asset-Backed Securities Loan Facility. As the chief watchdog of the financial system’s $700 billion bailout says, that’s tantmount to the Fed endorsing a rate it suspects is fraudulent.

What’s a suitable punishment for failing to blow the whistle on Barclays’ fraudulent conduct and then lying to Charlie Rose? Can we strip the New York Fed of one of its Directors and take away its vote on the Federal Open Market Committee for four years?

Do you remember when we were told that Tim Geithner was so uniquely qualified to be Secretary of Treasury that we needed to overlook the fact that he cheated on his taxes? It’s a good thing Congress heeded this warning. Otherwise, we might have had 40 consecutive months of unemployment over 8 percent.