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.
"If we sought to renegotiate the rate, it is likely that borrowers either would not agree to a rate change or would agree only to a change that would result in a lower payment to the taxpayers," according to the Oct. 9 letter obtained by Bloomberg News.
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