Thursday, April 4, 2013

'Substantial Portion' of Libor Suits Dismissed

The 'Libor' scandal concerns the London interbank offered rate, which according to The Wall Street Journal is "the benchmark for interest rates on trillions of dollars of loans to individuals and businesses around the world" (Enrich & Munoz, A1)


I learned about the specifics of how the libor rate is set at Max Keiser.

15 big banks submit records of the inter-bank interest rates they pay and the Libor rate is supposed to be averaged from these records of the 15 big banks.

However, the banks colluded in emails to submit falsified records in order to manipulate the libor rate, and to profit from that manipulation.

Barclays got caught red handed and agreed to pay $453 million "to settle US and British authorities' allegations that the British bank tried to manipulate the London interbank offered rate..." (Enrich & Munoz, A1).

Resignations occurred at Barclays. Read about charges here

Matt Taibbi reported last July that the British Government knew about the Libor manipulation:

Taibbi: LIBOR Banking Scandal Deepens; Barclays Releases Damning Email, Implicates British Government. Rolling Stone July 4, 2012
Read more: 

Now we find that civil suits against the banks involved in Libor were DISMISSED by a judge. The rationale is not explained fully in the Reuters article covering the dismissal:
By Nate Raymond and Carrick Mollenkamp ( Mar 29, 2013) Banks score major win in private Libor suits Reuters) -

[Excerpted] The world's biggest banks won a major victory on Friday when a U.S. judge dismissed a "substantial portion" of the claims in private lawsuits accusing them of rigging global benchmark interest rates.

The 16 banks had faced claims totaling billions of dollars in the case, which had been considered the biggest legal threat that they faced aside from investigations being pursued by regulators in the United States, Europe and Britain.

The banks include: Bank of America Corp (BAC.N), Citigroup Inc (C.N), Credit Suisse Group AG (CSGN.VX), Deutsche Bank AG (DBKGn.DE), HSBC Holdings PLC (HSBA.L), JPMorgan Chase & Co (JPM.N), Royal Bank of Canada (RY.TO), Royal Bank of Scotland and WestLB AG WDLG.UL.

They had been accused by a diverse body of private plaintiffs, ranging from bondholders to the city of Baltimore, of conspiring to manipulate the London Interbank Offered Rate (Libor), a key benchmark at the heart of more than $550 trillion in financial products.

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. Small movements in those rates can mean sizable gains or losses for those gambling on which way the rates move.... 

Michael Hausfeld, a lawyer for the plaintiffs, noted the judge had granted the parties the ability to amend and refile their lawsuit. "We have the decision under evaluation," he said. "We are considering filing an amended complaint or taking an appeal, but we haven't decided yet." [end]
Majia here:  The article is NOT clear about why these charges were dismissed. Read about how the Libor rate was manipulated and you too will wonder how a judge could dismiss charges:

    Mar 9, 2013 – [excerpted] Lawyers for some of the world's biggest banks made their latest bid Tuesday to persuade a judge to toss out a collection of lawsuits ...
  2. Majia's Blog: Libor Suits Mount But Fraud, Corruption and Predation ...
    Aug 27, 2012 – Majia here: The Libor scandal dramatizes the fraud at the very heart of the financial ...
  3. Majia's Blog: The Libor Scandal
    Jul 5, 2012 – I hope everyone is following this scandal. It is yet another example of how corrupt the financial world is. As if we need another example.
  4. Majia's Blog: WSJ: "Libor Suits Weighed by Mutual Fund Firms"
    Jul 27, 2012 – Majia here: The article notes that around $2.5 trillion in assets could be the most likely affected because of possible ties to Libor ...
  5. Majia's Blog: WSJ: "Traders Manipulated Key Rate, Bank Says"
    Feb 18, 2012 – The article reports that six banks on the yen Libor panel, including Citigroup, Deustsche Bank AG, HsBC ... Posted by Majia's Blog at 1:15 PM ...
  6. Majia's Blog: March 21: JP Morgan's Jamie Dimon Should Be Tried ...
    Mar 21, 2013 – majiasblog Mar 9, 2013 – Majia here: Unbelievable! Clearly there is no justice for the ...
  7. Majia's Blog: More Fraud in the Municipal Bond Market
    Jul 31, 2012 – For background on Libor see my post here: Posted by Majia's Blog at 10:06 AM ...


Enrich, D., & Munoz, S. S. (2012, July 5). Rate Scandal Set to Spread. The Wall Street Journal, p. A1, A5.

Matt Taibi previously reported on how US banks used predatory interest rates against municipalities "Looting Main Street"–Matt Taibbi on How the Nation’s Biggest Banks Are Ripping Off American Cities with Predatory Deals"

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