What’s in Your Wallet?
Eight California counties and public entities sued UBS Bank, Barclays Bank, Bank of America, Citibank, JP Morgan Chase, and other banks alleging they defrauded
and lost millions of dollars because the financial institutions
manipulated, fixed, and lied about the benchmark LIBOR rate.
Complaints were filed today in federal court in Los Angeles, San Francisco and San Diego on behalf of the counties of San Diego and San Mateo, the city of Riverside, the city of Richmond, and four other entities against 22 current and former banks that set LIBOR rates, law firm Cotchett Pitre & McCarthy LLP said in a statement.
The lawsuits filed today allege violations of antitrust laws, negligence and unjust enrichment and seek to recover losses and triple damages. The plaintiffs claim they were cheated out of higher interest payments on investments such as interest-rate swaps and corporate bonds tied to LIBOR.
LIBOR, or the “London Interbank Offered Rate,” is the world’s benchmark interest rate used for setting short-term interest rates on a wide range of financial instruments – from simple car loans, mortgages, student loans, and credit cards to complex municipal derivative investments by public entities.
LIBOR-based investments are in the trillions of dollars every year. About 90 percent of US commercial and mortgage loans are linked to the index
LIBOR is based on a self-reporting British Bankers’ Association daily survey that asks lenders to estimate
and average how much it would cost to borrow money from each other for various periods in 10 different currencies. It is accepted by the global financial system as the true cost of borrowing between financial institutions because it was believed to represent the true interest rate at which borrowers are able to borrow money.
John C. Beiers, County Counsel for San Mateo County, said in the statement Wednesday, “LIBOR was manipulated on a global scale, and it’s a sad fact that the rigging of LIBOR is just another outrageous example of how self-regulated financial markets take advantage of average hardworking people and Main Street public entities.”
San Mateo County Supervisor Don Horsley added, “It’s the local taxpayers and those that need services such as healthcare that suffer when these global institutions think only about their bottom line, and nothing about who they might harm. We are going to aggressively pursue this lawsuit and others to ensure that these faceless and heartless
institutions do not benefit at the expense of those in need.”
Banks already face 30 lawsuits by U.S. homeowners and other plaintiffs seeking to hold them responsible for alleged manipulation of the rate used as a borrowing-cost benchmark. A class-action lawsuit filed in Manhattan in October by homeowners alleges a conspiracy among financial institutions drove up the cost of mortgage loans.
Between 2005 and 2007, Barclays, UBS and other banks systematically conspired and inflated their borrowing cost estimates to the LIBOR board in order to drive up the LIBOR rate and increase their profits on derivatives linked to it. After 2007, when the global financial crisis intensified, the banks lowballed their submissions to LIBOR in order to mask their financial weaknesses and lower their borrowing costs.
By manipulating the rate upward, the banks robbed countless millions of people of billions of dollars in inflated loan costs. By manipulating the rate downward, they deprived states, cities, pension funds and retirees with fixed investments of untold billions in revenues from bond holdings.
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If you haven’t heard of LIBOR– or the LIBOR scandal yet– you will. It’s a very, very big deal. Knowledgeable insiders are begging the question as to whether US interest rates have been equally and similarly fixed.
There has been so much crime, collusion, and corruption lately between banks and Wall Street it’s been hard to keep up, friends. Greed and gluttony have no boundaries, few regulations, and even fewer still have gone to jail.
Corruption is worse than prostitution. The latter might endanger the morals of an individual, but the former invariably endangers the morals of entire institutions.