Christy Romero, the Special Inspector General for the Troubled Asset Relief Program (TARP), said that the Treasury Department should stop using the Libor overnight interest rate in its loan programs given that it is “potentially subject to manipulation” and undermines confidence in the markets, MarketWatch.com reported today. The rate is at the center of a massive industry-wide, international investigation into the setting of interbank-lending rates after Barclays PLC was fined roughly $450 million in June for fixing the London rate for interbank lending (Libor). According to TARP’s inspector general, taxpayers are owed over $6 billion in long-term loans indexed to the rate. Instead of indexing to Libor, the report recommends that TARP contracts should be amended to use alternative rates permitted by the program, according to Romero.
