US Treasury Rejects Request to Stop Using Libor in Bailouts

The U.S. Treasury Department said it plans to continue using 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 Federal Reserve 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.” The letter, dated Oct. 9, was obtained by Bloomberg News.

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