Sheila Bair On New York Fed's Role In Libor Scandal: 'I Don't Understand Why They Didn't Investigate'

When it comes to the Libor scandal, Sheila Bair says Timothy Geithner just didn't do a very good job watching over Wall Street.

Geithner, now the U.S. Treasury Secretary, has come under fire for not acting more forcefully as president of the Federal Reserve Bank of New York when, in 2007 or 2008, he found that banks were manipulating the Libor rate. Sixteen banks are currently under investigation for allegedly rigging the Libor rate, a key interbank lending rate that is a benchmark for global interest rates.

Geithner defended himself at the Delivering Alpha conference on Wednesday. But the former chair of the Federal Deposit Insurance Corporation doesn't appear to agree.

"Looking at those e-mails, it looks like they had pretty explicit notification of some very bad behavior, and I don't understand why they didn't investigate," Bair, former chair of the Federal Deposit Insurance Corporation, said of Geithner's New York Fed on CNBC Friday. "They did have authority to do that."

Bair added that Geithner and the New York Fed "deserve credit for trying to suggest some reforms, but again, even then those reforms did not tackle the core problem, which was that it wasn't a transaction-based survey; it was a judgment survey." No wonder: Geithner's recommendations for reform came straight from the banks, The Huffington Post reported on Monday.

Bair added in the interview that as FDIC chair, she "had no idea" that there was "really overt rate-fixing" by the banks. "I don't think anybody did, except apparently the New York Fed," she said. A 2008 Wall Street Journal analysis found evidence of Libor manipulation by major banks.

Geithner said on Wednesday that when his New York Fed found out about the Libor scandal, "We brought it to the attention of the U.S. enforcement community," including the U.S. Regulatory Committee, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.

Here are 16 banks involved in the Libor scandal: