WASHINGTON — Senate and House committees are looking into allegations that banks manipulated Libor, the London Interbank Offered Rate that is used by financial institutions to set interest rates for financial products, including interest rate swaps used by municipal bond issuers to hedge variable-rate debt.

Members of the Senate Banking and House Financial Services Committees also are preparing to grill Treasury Secretary Timothy Geithner and Federal Reserve Board chairman Ben Bernanke on the matter during the next two weeks at hearings where the two are scheduled to testify.

On Tuesday, Senate Banking Committee chairman Tim Johnson, D-S.D., said in a release: “I am concerned by the growing allegations of potential widespread manipulation of Libor and similar interbank rates by some financial firms. At my direction the committee staff has begun to schedule bipartisan briefings with relevant parties to learn more about these allegations and related enforcement actions. It is important that we understand how any manipulation may impact American consumers and the U.S. financial system.”

Meanwhile, Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee, said at a hearing Tuesday that U.S. federal regulators knew about problems with Libor during the financial crisis but failed to act.

“They knew there was a problem ... and they didn’t do anything about it,” Bachus said during the committee’s capital markets subcommittee’s hearing Tuesday on the impact of the Dodd-Frank Act.

The Federal Reserve Bank of New York said in a release on Monday that after the financial crisis began to unfold in 2007, it had “occasional anecdotal reports” from Barclays about problems with Libor.

The bank said that in the spring of 2008, it “made further inquiry of Barclays as to how Libor submissions were being conducted” and that it “subsequently shared analysis and suggestions for reform of Libor with the relevant authorities in the U.K.”

Geithner was president and chief executive officer of the New York Fed at that time.

On Monday, Rep. Randy Neugebauer, R-Tex., chairman of the House Financial Services Committee’s oversight and investigations panel, asked William Dudley, the current president of the New York Fed, to provide the committee with all available transcripts of communications with Barclays that related to the setting of interbank offered rates from August 2007 to November 2009.

Neugebauer requested the documents by Friday, July 13.

Asked if the Municipal Securities Rulemaking Board is doing anything with regard to the Libor allegations, Lynnette Kelly, the MSRB’s executive director, said, “We’re monitoring developments and will consider any actions that may be appropriate as facts become known.”

Last month Barclays agreed to pay $453 million to U.S. and U.K. regulators to settle allegations that it had manipulated Libor.

Barclays and other major international financial institutions are alleged to have colluded to keep the rate artificially low to give the impression that their borrowing costs were not affected by the financial crisis. As a result, Libor-related swap payments to issuers were reduced.

Industry sources estimate that municipal issuers have between $50 billion and $100 billion in Libor-related transactions, most tied to the one-month Libor rate.

Bernanke is testifying on the Fed’s semiannual monetary report before the Senate Banking Committee on July 17. He is testifying on the report before the House Financial Services Committee the next day.

On July 25, Geithner is testifying before the House committee on the annual report of the Financial Stability Oversight Council.

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