The manipulation of a global interest rate called LIBOR could be costing U.S. taxpayers money, according to a new federal watchdog report.
Taxpayers "continue to be at risk" from government bailout programs' reliance on the interest rate, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) said in a report released today.
In June, U.S. and British authorities charged Barclays Bank with attempting to manipulate the London Interbank Offered Rate (LIBOR), a benchmark that affects the cost of borrowing money throughout the world. Even though Barclays agreed to take remedial action, government officials still have questions about the reliability and integrity of the interest rate, according to the SIGTARP.
"Aside from the Barclays situation, market data raises questions about the integrity of LIBOR today," a U.S. regulatory official testified last month.
Previous news reports have explored how alleged LIBOR manipulation could affect home, credit card, and car loans in the U.S. But LIBOR could also spell trouble for U.S. taxpayers who have an ongoing stake in the government's bailout programs, the SIGTARP said.
There are two bailout programs—one managed by the Treasury Department, the other managed by Treasury and the Federal Reserve—that continue to rely on the LIBOR benchmark. These agencies have the authority to use a different benchmark, but they refuse to make the change, according to the SIGTARP.