It has occurred to members of the Congress of the United States that this Libor bid rigging thing might be a good opportunity to remind the banking industry that it’s election time.  So the House Banking Committee, whose members are placed there to assure privileged access to Wall Street campaign donations, will hold a hearing to ask Tim Geithner what he knew, when he knew it, and what he did about it.

When all this stuff was going down, Mr. Geithner was the head of the New York Federal Reserve, and from that position of Wall Street oversight responsibility, the New York Times tells us today, he was privy to reports and rumors of bid rigging to affect the Libor rates.   So what did he know and what did he do?

The Times tells us it has obtained documents and e-mails from that period (from Treasury? or from the Committee?), and those documents assure us that when Mr. Geithner found out about those illegal bidding schemes back in 2007-2008, he expressed his concerns to counterparts at the UK Bank of England and others and suggested ways to “improve” the reporting of rates that go into the Libor composite.  The Times DealBook headlines this story as ” Geithner tried to curb rate rigging in 2008.”   How reassuring.

We seem to be missing a barking dog or two in this story.  The thing that has apparently shocked so many people in the last few weeks since the story broke on Barclays’ bid rigging settlement with US and UK regulators is that no one seems to have warned the victims that the entire structure for setting interest rates on consumer loans, mortgages, municipal bonds, insurance swaps and everything else in the economy — literally trillions of dollars in transactions — was rigged.  It’s 2012, and they (the victims) just found out, so now there are hundreds of entities lining up to sue the world’s largest banksters for one of the largest frauds in history.

We have to be careful, though.  It’s not helpful that the Times story fails to distinguish too different periods.  There was the pre-financial-crisis period in which the banksters’ traders merely colluded with each other to push rates both up and down to cash in on their derivative positions and make themselves rich — that’s just the Enron mentality taking over Wall Streets banksters, and we’re likely to see that next in electricity markets and every other commodities market.

But then there was the 2008 period, in which the banksters are accused (and Barclays has admitted) of deliberately rigging the rates downward to avoid appearing to be in trouble, to fool investors and regulators about the extent of their internal crisis that was about to take down the whole system.  This is the period in which regulators should have been warning the public but were instead focused almost entirely on propping up and then shielding the system.

So, what exactly did Geithner and other US regulators do to warn consumers, pension plans, and state/local governments that they might be victims of the biggest fraud ever?  And did their desire to prop up the bank system affect what they were willing to tell the banks’ victims?

One hopes there are satisfactory answers to this, but for now, this looks like another chapter of Treasury’s “extend and pretend,” the game Geithner and Treasury/others have been playing to make sure the banksters appear to clean up their act and get healthy but never face the full accountability that their victims might demand if they knew the full truth.  We can’t have that, because the Administration’s number one economic principle during Tim Geithner’s tenure has been that the health of the economy does not depend on the number of unemployed or the condition of state and local budgets and services; it depends on the health of the nation’s banks.  What’s good for the banks is good for the economy, even as dozens of state and local governments slash public services and even face bankruptcy.

It’s not surprising that once again we read that the Administration was trying to play the well intentioned boy scout with the banks to get them to behave, but failed to be Marshal Dillon while the banks continued looting the country and regulators watched.  Unfortunately the chance of the House Banking Committee getting to the bottom of this are not good.   We’ll have more coverage as the hearings progress.

More: The Times story has been updated; Barclays was warning the Fed in April 2007 2008.