Treasury, Fed Reject Call to Stop Using Libor in TARP

Treasury and Fed lacks the authority to change interest rate on loans, Treasury says.

The U.S. Treasury Department and the Federal Reserve defended the use of Libor in rates tied to the Troubled Asset Relief Program, rejecting a request from the watchdog of the U.S. financial crisis bailouts.

Neither the Treasury nor the Fed has “the authority to change unilaterally the interest rate on the small number of remaining loans that rely on Libor,” Timothy Massad, the Treasury’s assistant secretary for financial stability, said in a letter to Christy Romero, special inspector general for TARP.

Repaid Loans

“About half of the TALF loans extended had interest rates that were based on Libor,” William Nelson, deputy director in the Fed Board’s division of monetary affairs, said in a letter obtained by Bloomberg News and addressed to Romero. “Over 98 percent of those loans have already been repaid.”

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