Reuters’s Carrick Mollenkamp, who broke the Libor scandal open in 2008 with Mark Whitehouse when they were at The Wall Street Journal, reports that the Federal Reserve was told in 2007 and 2008 that there were serious problems with Libor.

The role of the Fed is likely to raise questions about whether it and other authorities took enough action to address concerns they had about the way Libor rates were set, or whether their struggle to keep the banking system afloat through the financial crisis meant the issue took a backseat…

Barclays said in documents released last Tuesday that it first contacted Fed officials to discuss Libor on August 28, 2007, at a time when credit problems arising from the U.S. housing bust were beginning to mount. It communicated with the Fed twice that day.

Between then and October 2008, it communicated another 10 times with the U.S. central bank about Libor submissions, including Libor-related problems during the financial crisis, according to the documents.

The New York Fed, then headed by now-Treasury Secretary Tim Geithner, apparently didn’t do much of anything, surprisingly enough.

— Naked Capitalism’s Yves Smith flags this passage in The Economist’s coverage of the Libor scandal (emphasis mine)

This could well be global finance’s “tobacco moment”.

The dangers of this are obvious. Popular fury and class- action suits are seldom a good starting point for new rules. Yet despite the risks of banker-bashing, a clean-up is in order, for the banking industry’s credibility is shot, and without trust neither the business nor the clients it serves can prosperity.

Smith:

Translation: don’t do too much while tempers are hot. Yet this stance also happens to be the one used again and again by incumbents and lobbyists: drag out discussions of what to do until the public’s attention has moved elsewhere. As Frank Partnoy recounted in his book Infectious Greed, this strategy was particularly effective in the 1994 derivatives wipeout, which destroyed more wealth than the 1987 crash. A series of investigations and hearings in the end produced close to nothing because the banking industry was able to drag out the process, and then argue that things were back to normal, so why were any changes needed?

— Reuters’s Cate Long looks at a Goldman Sachs’s marketing campaign touting its financing of an arena in Louisville.

I’m not sure that hyping a junk muniland deal that threatens to swamp a city with unexpected bond payments is the best way for Goldman to redeem its tarnished reputation.

Goldman must have understood how flimsy this deal was when it was initially structured. The original Moody’s and Standard & Poor’s ratings were Baa3 and BBB-, respectively, the lowest possible ratings a deal can receive to still be considered investment grade. It’s not a big surprise that after three years the deal is junk.

The financing has fallen well short of projections.