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Scott Urges Close Look at Libor Effect on Florida

By: David Royse, The News Service of Florida
By: David Royse, The News Service of Florida

THE CAPITAL, TALLAHASSEE, July 18, 2012

David Royse, The News Service of Florida

Gov. Rick Scott wrote Tuesday to Florida's congressional delegation urging members to press for information on how much a growing interest rate scandal may have cost Florida.

A scandal that began in England over possible manipulation of the London interbank offered rate – or Libor – a key determiner of interest rates, affects the United States because the rate is a global benchmark. U.S. regulators have said they warned about possible misconduct in setting the rate, and that U.S. banks are being investigated, but ultimately the failure was in Britain.

British bank Barclays has settled for $450 million with U.S. and U.K. regulators over the issue, but Federal Reserve Chairman Ben Bernanke said Tuesday that the problem is broad, and that he can't say with assurance that the rate is reliable.

"With the potential for such widespread implications, many questions have arisen about the impact these practices may have had on Florida families and small businesses during a time period in which many of them were struggling to find work and pay their mortgages," Scott said in the letter to Florida members of Congress. "The potential impacts on the income, retirement savings, and costs of living for so many Floridians deserve immediate attention to ensure that they have not and will not suffer unfair consequences as a result of this severe breach of trust.

"…The question that must be answered is 'how much money has this cost Florida families,'" Scott said.

Scott's letter followed announcements earlier Tuesday that New York and Connecticut are formally investigating whether those states lost any money as a result of interest rate manipulation with a goal of getting restitution.

A spokeswoman for Florida Attorney General Pam Bondi said her office was also looking into the matter, but hadn't begun anything formally.

The biggest impact on Florida may be felt by municipalities. Local government agencies increasingly use interest rates swaps, a kind of derivative, to help fund bonding. Some rates related to those deals are tied to the Libor rate, and have dropped costing local governments money.

Scott asked that members of the delegation "focus attention on this issue," and also suggested that Congress look at whether the federal government should have done something.

"I would sincerely appreciate your consideration and investigation of the potential impacts of Libor manipulation on our residents as well as a careful review to ensure the federal government acted sufficiently to protect the cost of living, retirement and investments of Floridians," Scott wrote.

Members of Congress have already begun questioning U.S. regulators – Bernanke was put through a line of questioning Tuesday by the Senate Banking Committee about what American regulators did, and what they might have done.


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