Another bank ripoff and another lawsuit dismissed. The Libor manipulation scandal spurred private investors and others to sue the banks over their losses. A judge just threw out major portions of their case. There were at least 22 Plaintiffs. Now groups like the City of Baltimore are out of luck in recovering all of their losses due to banks manipulating a key interest rate.
In a significant setback for the plaintiffs, U.S. District Judge Naomi Reice Buchwald in Manhattan granted the banks' motion to dismiss federal antitrust claims and partially dismissed the plaintiffs' claims of commodities manipulation. She also dismissed racketeering and state-law claims.
Buchwald did allow a portion of the lawsuit to continue that claims the banks' alleged manipulation of Libor harmed traders who bet on interest rates.
Earlier Freddie Mac sued the banks for an undisclosed amount over rigging the LIBOR, which cost Freddie Mac and Fannie Mae over $3 billion as calculated in this study (pdf). Some of the banks Freddie Mac sued are Bank of America Corp, JPMorgan Chase & Co, UBS AG and Credit Suisse Group AG. Below is a graph of the LIBOR against the Federal Reserve Eurodollar deposit rate, or Fed Ed. The two diverged, up to 3% in September 2008, as illustrated. Barclays rate rigging cost thousands of businesses millions, as the LIBOR dictates interest payments on a slurry of holdings .
In spite of the massive losses and clear benchmark rate manipulations, the methods for calculating the LIBOR are still not fixed.
Libor ignored the crisis in Cyprus that’s roiling financial markets, showing the global benchmark for $300 trillion of securities remains divorced from reality six months after regulators laid out a plan to fix it.
The good news is legal fees just to cope with the flurry of lawsuits, plus the individual settlements are still costing the banks over $100 billion.
Big banks are paying dearly for their recent bad behavior: to the tune of $100 billion and counting, reports the Wall Street Journal. The top four US banks alone have paid $61.3 billion in financial crisis- and mortgage-related settlements over the past three years, and analysts don't expect the damages to end there. One expects another $24.7 billion to go toward mortgage lawsuits and at least $14 billion to be spent on other settlements.
This is in spite of the delays in repairing the LIBOR and conflicting regulations. Australia just threw up their hands and plum said forget the LIBOR to determine interest rates and moved to market prices.
Australia will use prices displayed electronically by brokers and trading venues to set the price of the country’s benchmark interbank borrowing rate.
The Australian Financial Markets Association, which represents 130 Australian and international banks, brokers and fund managers, announced on Wednesday it would disband the panel used to set the bank bill swap rate.
Britain just issued new rules for calculating the LIBOR, but surprise not, compliance to the new rules are voluntary.
Regulators across the world are watching to see how the Financial Services Authority's (FSA) rules, due to come into force next month, will work out.
The European Union is considering whether to force banks to help compile Euribor, Europe's counterpart to the London Interbank Offered Rate (Libor), to safeguard its integrity.
Banks including Dutch lender Rabobank, Switzerland's UBS (UBSN.VX) and U.S.-based Citigroup (C.N) have said they no longer wanted to participate in the Euribor-setting process.
Regulators worry that if too many banks drop out, the quotes banks submit would become unrepresentative and the benchmark rate could be easily manipulated.
Banks submit an estimate of the rate at which they think they could borrow from another bank and these quotes are used to compile the benchmark.
The FSA, which put the issue of compulsory participation to banks last December, said on Monday it was still considering the feedback.
As usual, we have a financial scandal, accompanied by billions in losses. Lawsuits then ensue but are dismissed, delayed and dropped. Regulators flurry to set new rules, which then are watered down or not enforced as the public forgets what even happened. After the dust has cleared and rate rigging goes to the scandal dust heap of distant memory, banks go about their usual practice of doing whatever the hell they want to.
The whole show seems to be about money transfer to the banks, sucked out of the pockets of regular people and sovereign nations. To that end, the deposit seizure is Cyprus is much larger than originally estimated. How much? Instead of the reported 13% estimate, depositors with more than €100,000 will lose over 60% of their deposits at the bank of Cyprus. Banks do what they want, the rest of the globe be damned.