Fed Draws Lawmaker Scrutiny After Release of Libor Papers

By Caroline Salas Gage and Cheyenne Hopkins

The Federal Reserve Bank of New York is drawing more scrutiny from lawmakers critical of its record as a bank supervisor after releasing documents showing it was aware Barclays Plc (BARC) underreported London interbank offered rates in 2008. The New York Fed knew “some banks” were potentially understating submissions for Libor as early as 2007, according to a statement posted on its website yesterday. A Barclays employee told a New York Fed staff member in April 2008 that the U.K.’s second-largest lender was underreporting its rate to avoid a “stigma,” the Fed bank said. “They are going to have a very difficult audience” on Capitol Hill, said Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a Washington research firm. “It’s going to be ‘What did you know, when did you know it, and why didn’t you do anything about it?’”