LIBOR: The Regulators Blew It. “It’s becoming increasingly clear that the LIBOR scandal is not Lehman Bros. redux but rather Bernie Madoff redux. Indeed, in some respects it’s worse than the Madoff case, because at least some regulators were informed of the problems and did nothing and, worse yet, some may even have encouraged false reporting so as to maintain ‘confidence’ during the financial crisis. In sum, the regulator failures are very much part of the real scandal here.”

The New York Fed knew about this scandal in 2007. Tim “Turbo Tax” Geithner was President of the New York Fed at the time. Now he’s Treasury Secretary. Charles Gasparino asks What Did Tim Know?

The latest development in the Libor-manipulation scandal is that the banks weren’t really fixing the price of the key interest rate in total secret — US regulators were aware of the sleazy activities at the time, and seemed to have done nothing.

Which should surprise no one. . . .

The New York Fed has two main functions: It handles the transactions whereby the overall Federal Reserve controls the nation’s money supply, and it’s supposed to be the chief regulator of the big banks in its region.

When Obama named him for Treasury, the banking industry hailed Geithner as a godsend. Shares shot up on his announcement, and CEOs called it a wise choice for a key job at a time of crisis.

But the dirty little secret on Wall Street is that the New York Fed is a horrible regulator: It sees its chief job as keeping the banking system intact. Since it needs its member banks to buy US government debt and to control the money supply, the last thing it wants to do is shed light on the banks’ shady practices.

Which is why the Wall Street power brokers loved Geithner so much: On his New York Fed watch, he basically let them get away with the financial equivalent of murder, letting them take on the astronomical amounts of risk that ultimately blew up the system in 2008.

Read the whole thing.