Friday, July 27, 2012
Bernanke, Geithner response to Libor scandal rings hollow
By Pedro Nicolaci da Costa
WASHINGTON, July 27 | Fri Jul 27, 2012 11:36pm IST
(Reuters) - Ben Bernanke heads the most powerful central bank in the world. Yet the Federal Reserve chairman says he was largely powerless to stop what some are calling the biggest financial fraud in history: the systematic manipulation of a key global interest rate.
It's a line of argument that has fallen flat with some lawmakers and investors, who want to know why Bernanke and other key U.S. regulators did not do more to end a potentially criminal rigging of interest rates affecting trillions of dollars in financial contracts.
Bernanke said last week he had been largely unable to directly address problems with Libor, or the London interbank offered rate, which he said he learned of in 2008.
"We are and need to continue advocating for reforms to the Libor process. It is constructed by a private organization in the UK, and so our direct ability to influence that is limited," Bernanke said in congressional testimony.
Timothy Geithner, who oversaw Wall Street as president of the New York Fed for five years before he became Treasury Secretary in 2009, has delivered much the same message.
He told lawmakers this week that he informed regulators "early on" about the problems and made recommendations to the Bank of England on how to reform the system.
"Seriously? They did all that they could do? I mean, come on," said Alan De Rose, managing director of government and trading finance at Oppenheimer in New York.
"Answers like those, they strain credibility," said De Rose, formerly a trader at a U.S. primary dealer, the selected large banks that do business directly with the Fed.
Legislators are similarly skeptical, at a time when the Fed is already taking heat in Congress for its regulatory failings that contributed to the financial crisis.
Republican Congressman Scott Garrett took aim at Geithner at a hearing of the House of Representatives' Financial Services Committee on Wednesday.
"You have been before this committee countless numbers of times since 2008 and if this is the crime of the century, as so many people are reporting today, never once did you ever once come and mention it as being a problem, never once did you come here and say this is what you're going to do about it," he said.
The revelations about Libor have further dented public confidence in the financial industry, which has been battered by a string of crises that led to unpopular taxpayer bailouts in many advanced economies. It is also another blow to the standing of regulators who have been widely accused of being asleep at the switch in the run-up to the financial crisis of 2008-2009.
Geithner told lawmakers this week he contacted the appropriate regulatory authorities, including the Bank of England, quickly after being informed that there were suspicions about the veracity of rates being reported by banks.
"We, at least I, first learned about those concerns in the early parts of spring of 2008 and we acted very quickly at that stage," Geithner said. "We took a very careful look at these concerns, we thought those concerns were justified."
The Federal Reserve Board, the New York Fed and the Treasury all declined to comment for this article.
Policymakers had a lot on their plate in 2008 as the global financial system was at risk of melting down.
JAY-WALKING OR HIGHWAY ROBBERY?
As well as wondering why U.S. regulators failed to follow up with the British authorities after no immediate corrective steps were taken, lawmakers noted the Fed itself continued to use Libor as a benchmark in its emergency lending programs, including the controversial bailout of failed insurer AIG.
"It appears that the early response was to keep using it, which means it appears that you treated it as almost a curiosity or something akin to jay-walking instead of highway robbery," Republican Congressman Jeb Hensarling told Geithner this week.
Robert Shapiro, a former undersecretary of the U.S. Commerce Department who now runs Sonecon, an advisory firm in Washington, says the scandal is vast and will continue to grow.
"Barclays is not some lone, bad apple. This could well turn into the largest consumer fraud ever seen," Shapiro said.
Barclays last month admitted to giving false information as part of setting the interest rate in a record $453 million settlement with U.S. and UK authorities.
Dozens of big banks, including JPMorgan Chase & Co, are under investigation. An internal probe at Deutsche Bank found two former traders may have been involved in colluding to manipulate global benchmark interest rates but suggested top managers were unaware of the fraud.
Things could get more embarrassing for U.S. regulators. The House Financial Services Committee has asked the New York Fed for all communications going back to August 2007 with the banks that helped set Libor.
The first trove of documents from the New York Fed showed Barclays had flagged concerns as early as 2007 and Geithner sent the email to Bank of England governor Mervyn King in June 2008 with the Libor recommendations.
Still, analysts do not see immediate repercussions for Bernanke and Geithner other than the risk of an additional loss of public confidence.
Dean Baker, co-director of the Center for Economic and Policy Research, a liberal think tank in Washington, says the comments from Bernanke stretch credulity, particularly after the Fed fought hard to keep regulatory power over banks in post-financial crisis reforms.
"He is insulting his audience to say there was nothing they could do," Baker said. "That is complete nonsense. If he had called up King and said that he has to fix the Libor, and if he doesn't this all goes public, then King would have no choice."
"I think this is a case of the central bankers being a good old boys club and that would be considered rude behavior. Rather than break the rules of the club, Bernanke allowed this fraud to continue, violating his responsibilities as Fed chair."
The apparently mild nature of Geithner's warnings about Libor to the Bank of England allowed King to claim he was never informed of accusations of fraud at all, critics say.
Simon Johnson, a former chief economist at the International Monetary Fund, lambasted the Fed.
"The Federal Reserve is responsible for the 'safety and soundness' of the financial system in the United States," said Johnson, now a professor at the MIT Sloan School of Management.
"Does allowing suspicions of fraud to continue unchecked at the heart of this system help to sustain the credibility and legitimacy of markets? Surely not."
Obama signs Israel security bill ahead of Romney visit
President Barack Obama signs the U.S.-Israel Enhanced Security Cooperation Act while (from L-R) Chairman of the Conference of Presidents of Major American Jewish Organizations Richard Stone, U.S. Sen. Barbara Boxer (D-Ca.), and past chair of AIPAC Howard Friedman watch in the Oval Office of the White House in Washington, July 27, 2012.
Credit: Reuters/Larry Downing
By Matt Spetalnick
WASHINGTON | Sat Jul 28, 2012 3:02am IST
(Reuters) - President Barack Obama signed a measure on Friday to strengthen U.S.-Israeli military ties, a move that could score points with American Jewish voters on the eve of Republican rival Mitt Romney's highly publicized visit to Israel.
Obama also used the White House bill-signing ceremony to announce he was releasing $70 million in approved funding for Israel's short-range rocket shield known as "Iron Dome," a project backed strongly by the powerful U.S. pro-Israel lobby.
His reaffirmation of an "unshakeable commitment" to Israel's security appeared timed to upstage Romney, who has accused the president of undermining Washington's relationship with its No. 1 partner in the Middle East.
The White House denied it was an election-year maneuver, even though senior administration officials have lavished attention on Israel in recent weeks.
Romney, whose Olympics-week tour of London has been plagued by diplomatic stumbles, will travel on Saturday to Jerusalem and meet on Sunday with Israeli Prime Minister Benjamin Netanyahu, who has had a strained relationship with Obama.
"I have made it a top priority for my administration to deepen cooperation with Israel across a whole spectrum of security issues," Obama said in the Oval Office.
Congress passed the legislation last week with broad support from Republicans and Obama's Democrats, but the president waited until Friday to put his signature to it.
He was flanked by U.S. Senator Barbara Boxer and Representative Howard Berman, the bill's sponsors, and several prominent Jewish leaders, including Lee Rosenberg, chairman of AIPAC, the leading pro-Israel lobby, and Richard Stone, chairman of the Conference of Presidents of Major American Jewish Organizations.
Obama, criticized by some of Israel's U.S. supporters for being too tough on a crucial ally, wants to shore up his advantage over Romney among Jewish voters, who could prove critical in battleground states like Florida and Pennsylvania in the November 6 election.
OUTREACH TO ISRAEL'S SUPPORTERS
Obama received 78 percent of the Jewish vote in the 2008 election, but a nationwide Gallup poll in June showed him down to 64 percent backing versus Romney's 29 percent.
Obama angered many Israelis and their U.S. supporters last year when he insisted any negotiations on the borders of a future Palestinian state begin on the basis of lines that existed before Israel captured the West Bank and Gaza Strip in a 1967 war. His Middle East peace efforts have stalled.
Obama visited Israel as a candidate in the 2008 campaign but has not done so as president. He has insisted security ties with Israel have never been stronger, although he has pressed Netanyahu to hold off on any attack on Iran's nuclear sites to give diplomacy and sanctions more time to work.
Romney has accused Obama of being too hard on Israel and not tough enough with Iran.
The new bill calls for enhanced cooperation with Israel, already a major beneficiary of military aid, on missile defense and intelligence, and increased access to advanced weapons.
Romney campaign spokeswoman Amanda Henneberg said the former Massachusetts governor was "happy" to see enhanced security cooperation with Israel.
"Unfortunately this bill does nothing to address ... evasiveness from the White House on whether President Obama recognizes Jerusalem as the capital of Israel, which raised doubt about the president's commitment to our closest ally in the region," she said.
The White House says Obama holds to long-standing U.S. policy that the status of Jerusalem, which Israel considers its undivided capital despite a lack of international recognition of its annexation of the Arab half of the city, be resolved in "final-status" negotiations between Israel and the Palestinians.
White House spokesman Jay Carney denied the bill signing was timed to pre-empt Romney, saying it was a scheduling matter, but adding, "I understand the coincidence."
Romney on Sunday will also meet President Shimon Peres, other top Israeli politicians and Palestinian Prime Minister Salam Fayyad, and deliver a foreign policy speech.
Assistant Secretary of State Andrew Shapiro said Washington understood Israel's anxiety about the changing situation in the Middle East and remained committed to helping it maintain its "qualitative military edge in the region."
Defense Secretary Leon Panetta will visit Israel next week to discuss heightened tensions in the region, including the escalating conflict in Syria.
(Additional reporting by Andrea Shalal-Esa; Editing by Peter Cooney)
Head of Chick-fil-A PR group dies suddenly
July 27 | Sat Jul 28, 2012 2:19am IST
(Reuters) - Don Perry, the long-time head of Chick-fil-A's public relations department, died unexpectedly on Friday, the company said, even as the fast food chain tried to negotiate a PR firestorm over its president's recent comments on gay marriage.
The Atlanta-based chain did not give a cause of death for Perry. Local media, citing Chick-fil-A franchise owners, said Perry had suffered a heart attack.
"Don was a member of our Chick-fil-A family for nearly 29 years," the company said in a statement. "He was a well-respected and well-liked media executive in the Atlanta and University of Georgia communities, and we will all miss him. Our thoughts and prayers are with his family."
Chick-fil-A has been in the center of a media storm after remarks by its president, Dan Cathy, earlier this month.
Cathy, son of Chick-fil-A's founder and current chairman, told an online religious newspaper that he supports "the biblical definition of the family unit" and that supporters of gay marriage were "arrogant."
Various politicians jumped on the comment. Boston Mayor Thomas Menino wrote a sharply worded letter to Dan Cathy, suggesting the company was not welcome in the city.
It has been a rare time in the spotlight for the privately owned chain, which has some 1,600 restaurants around the country selling popular fried-chicken sandwiches, waffle fries and peach milkshakes.
Perry, a native of rural Valdosta, Georgia, and a 1974 graduate of the University of Georgia, joined Chick-fil-A in 1983 to launch the public relations department at the growing company.
"My expression routinely is 'there are no dull days,'" he told alumni publication Georgia Magazine in a profile published in June. "You just don't know what's going to happen moment to moment." (Reporting by Ros Krasny in Boston; editing by Matthew Lewis)
Amelia Earhart Search: $2.2 Million Expedition To Find Famed Aviator's Plane
July 13, 2012 -- As the search for Amelia Earhart's plane probes the waters off Nikumaroro, a tiny uninhabited island in the southwestern Pacific republic of Kiribati, a new paper has reconstructed what may have happened to the legendary aviator 75 years ago.
Written by Thomas King, the senior archaeologist on Amelia Earhart search project, the paper summarizes 23 years of interdisciplinary research by the International Group for Historic Aircraft Recovery (or TIGHAR). It will be published by the academic journal Pacific Studies in October.
"In the Earhart case, strong circumstantial evidence supports the hypothesis that the pilot and navigator Fred Noonan landed their Lockheed Electra 10E safely on Nikumaroro, made repeated efforts to radio for help, and eventually died as castaways," King told Discovery News.
On a visit to the Amelia Earhart birthplace in Atchison, Kan., Karyn Mchorney and her daughter Emily look at photograph on Wednesday, March 21, 2012. A new theory has emerged based on a photo taken three months after she disappeared in an attempt to make a flight around the world in 1937. (AP Photo/The St. Joseph News-Press, Eric Keith )
This image provided by The International Group for Historic Aircraft Recovery and displayed at a U.S. State Department news conference on Tuesday, March 20, 2012, may provide a new clue in one of the 20th century's most enduring mysteries and could soon help uncover the fate of American aviator Amelia Earhart, who went missing without a trace over the South Pacific 75 years ago, investigators said. Enhanced analysis of a photograph taken just months after Earhart's Lockheed Electra plane vanished shows what experts think may be the landing gear of the aircraft, the small black object on the left side of the image, protruding from the waters off the remote island of Nikumaroro, in what is now the Pacific nation of Kiribati. Armed with that analysis by the State Department, historians, scientists and salvagers from The International Group for Historic Aircraft Recovery, are returning to the island in July 2012 in the hope of finding the wreckage of Earhart's plane and perhaps even the remains of the pilot and her navigator Fred Noonan. (AP Photo/The International Group for Historic Aircraft Recovery)
Ric Gillespie, right, founder of The International Group for Historic Aircraft Recovery, watches equipment testing alongside Wolfgang Burnside from aboard a ship at port in Honolulu on Sunday, July 1, 2012. Gillespie is leading a month-long voyage to find plane wreckage from Amelia Earhart's Lockheed Electra, which disappeared over the South Pacific 75 years ago. (AP Photo/Oskar Garcia)
A variety of fragmented objects collected by archaeologists at a site on the uninhabited island may have originally been American beauty and skin care products, all dating to the 1930s.
AMELIA EARHART: 115 YEARS OLD TODAY
Google marked the aviator's birthday with a Doodle on Google's front page today. It shows Earhart climbing a Lockheed Vega 5B monoplane as her yellow scarf flutters in the wind.
Born in Kansas on July 24, 1897, Earhart became the first woman to receive the U.S. Distinguished Flying Cross from Congress. The award was granted after she flew her Lockheed Vega from Newfoundland in Canada to Culmore in Northern Ireland in 1932 -- the first woman to fly solo across the Atlantic.
Tall, slender and brave, Earhart disappeared while flying over the Pacific Ocean on July 2, 1937 in a record attempt to fly around the world at the equator. Her final resting place remains a mystery.
The most recent attempt of finding evidence of her Lockheed Electra 10E, a $2.2 million expedition by The International Group for Historic Aircraft Recovery (TIGHAR ) off the waters of a tiny uninhabited island between Hawaii and Australia, ended up without any conclusive image of the plane.
Indeed, last week, TIGHAR called off the expedition to Nikumaroro island because of the difficult underwater environment -- filled with nooks and crannies and caves and projections -- and a number of technical issues.
Nevertheless, TIGHAR still believes Earhart and her navigator Fred Noonan landed on Nikumaroro's reef and died there as castaways.
"Big pieces of airplane wreckage were not immediately apparent, but after 75 years in Nikumaroro's severe and unstable underwater environment, that is hardly surprising. Whatever survives is hard to find," TIGHAR said in a statement.
They added that analysis of sonar data and review of many hours of high-definition video will tell "whether we found it."
Due to the limitations of the technology, the researchers were only able to see standard-definition video images during the search operations.
"Now that we're examining the recorded high-definition video, we're already seeing objects we want our forensic imaging specialist, Jeff Glickman, to look at," TIGHAR said.
"We'll also be getting expert second opinions on our best sonar targets," they added.
Results should be ready by the time a Discovery Channel show on the expedition airs on August 19th.
Photo: Amelia Earhart honored with a Google doodle.