From The Huffington Post: http://www.huffingtonpost.com/2012/07/13/new-york-fed-libor-documents_n_1671524.html
The New York Federal Reserve on Friday released documents showing it knew banks were manipulating a key interest rate more than four years ago.
The documents, which date back to 2007, show that the Fed became fully aware that banks were lying about their borrowing costs when setting Libor, and chose to take no action against them.
The documents will likely feed growing concerns about whether the New York Fed, its former chief Timothy Geithner and other market watchdogs did everything they could to stop the manipulation. The documents also raise more questions about whether the New York Fed and other regulators were too cozy with the banks involved, looking the other way in order to spare the banks too much pain at a time when the financial crisis was still brewing.
"We know that we’re not posting um, an honest LIBOR," a Barclays employee tells a New York Fed analyst in an April 11, 2008, call, "and yet we are doing it, because, um, if we didn’t do it, It draws, um, unwanted attention on ourselves."