By Louise Armitstead

The documents, which lift the lid on the evidence gathered by US investigators into the scandal, contain an email in which a Barclays trader warns a New York Fed employee that the Libor submissions for Aug 28, 2007, including one from Lloyds, “look too low”.

The whistleblower explains the improbability of the submission before saying: “Draw your own conclusions about why people are going for unrealistically low libors.

The claims about part-nationalised Lloyds, which is the second British bank to be implicated by US regulators after Barclays, emerged hours after Sir Mervyn King was drawn into the middle of the Libor scandal by a leak from the same batch of documents.

Emails released in New York showed that Tim Geithner had written to the Governor of the Bank of England in 2008, warning him about the risk of “deliberate misreporting” of Libor. The then head of the New York Fed, which acts as a Wall Street watchdog, included a memo of six recommendations needed to “establish a credible reporting procedure” instead.

The documents raise questions about how the Bank’s senior management apparently managed to remain unaware of the abuses in the Libor market until “the last few weeks”. Sir Mervyn is to be grilled by the Treasury select committee on the Libor scandal on Tuesday.

The documents were released after US politicians demanded that the New York Fed reveal all its correspondence with Barclays — fined £290m last month over the rigging of interbank lending rates — amid the escalating scandal that has shaken the City.

The evidence shows that the New York Fed gathered a mass of information about Libor rigging from sources inside Barclays in 2007 and 2008. On April 11, 2008, one Barclays trader told Fabiola Ravazzola, a New York Fed official: “So, we know that we’re not posting, um, an honest Libor… And yet and yet we are doing it, because, um, if we didn’t do it, it draws, um, unwanted attention on ourselves.”

Read More Here