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Secretary Tim Geithner taking his turn on the congressional hot seat today.
He defended his inaction on the Libor scandal while he was at the New York Federal Reserve.
But some members of congress are buying it here's one of the more heated exchanges from today's hearing.
When something gonna happen on the with the regulators who did something wrong here when something happened the regulators didn't catch this didn't do anything about it didn't change regulations didn't tell you you know congress what they defined what any regulator from the top down lose their jobs -- secretary.
Custom in my -- judgment.
Did the necessary appropriate thing in this context and they start that process very early.
By about -- to bring in former Federal Reserve economist.
And president -- DNJ advisors David Jones David thanks so much for joining us to be with you so think about that response he says that he thinks all the regulators involved did -- they were supposed to do you do you agree with that.
Well I give him credit Timothy Geithner then.
Head of the Federal Reserve Bank of New York for recognizing the problem he got a call.
He suggested a new structured way to create Libor sent a memo maybe should've said something about it sent a memo to the Bank of England it's very difficult to get to the bottom of the issue as -- who recognized what and win.
I would give Geithner better -- certainly in and I would give the Bank of England I'm guessing what kind of wanted more regulation the Bank of England wanted to less in terms of in terms of putting that Libor rate together.
But if there miss reporting.
That's that's lying.
-- all he does -- tell the Bank of England it seems like he had an obligation to tell justice to tell congress to tell someone else -- on that -- well.
This was remember were talking 2008.
And the markets were literally falling apart of the time and banks were willing to lend to each other let alone to anybody else.
And of course that Libor model model actress and -- now I mean he's had a lot more opportunities to do something about that since that day that's right but again he did something now he should have done more perhaps done more.
After the crisis was over.
I I think it is a regulator problem but I heard the deputy governor of the Bank of England testify before parliament and and -- Other raids that was somewhat curious to me remember there -- something like.
I don't know eighteen banks decide on this it's it's a British banking system issue only three of those banks are American.
-- of -- -- here he knew that that the system was being rigged to not a lot of things.
You know our sat on Libor what do you think happens in the end with this to think it just goes away or you think that there's change in the system -- you think something happens -- Timothy Geithner.
No no I think.
Timothy Geithner will probably come out of this okay although -- certainly will be criticized.
But I think what will happen is that certainly and Barkley is when it was evident that.
Traders in the derivatives were calling the money desk to change the rate.
That perhaps as criminal and some may go to jail because of that.
But I think it's more a story for the British banking system I'm shore and I think what's gonna happen is they're gonna choose a different rate a different short term rate I think -- Libor is toast.
It's -- it's gonna go wet I can't let go without asking you what you think is going as an insider at the Fed what do you think it's going to happen.
What's the Fed going to do next especially if we get this GDP reading at the end of the week that.
A lot of people are anticipating is going to be pretty bad -- -- like 1% do you think they'll act do you think it'll -- -- in.
They will act I'm not sure it'll be the one at the end of this month that the FOMC meaning.
But I do think -- act -- September yes exactly the mid September meeting press conference by the Fed Chairman.
They made it very clear that if the recovery loses momentum.
And it hurts the labor market sufficiently to say there will be no longer sustained improvement.
They're trying to act so I think we probably will get QE3 it's been a long time coming it's so sort of a last resort measure.
But I think we'll get it and -- QE3 look like this time.
-- -- just a guess.
I'm I'm think maybe 400 billion remembered QE.
Two with 600 billion QE1 was one points more than one point seven trillion.
The size is getting smaller.
And and we are getting diminishing returns in the market from this.
But the Fed has to do something and I think they'll finally and remember it's an election year obviously -- don't like to do a lot of things too close to the election because.
That the spotlight will be on the fail but I think this time they can afford and -- -- said diminishing returns we'll see what happens from that David Jones thanks for joining us thank you.