Bank of America, Citigroup and Credit Suisse Group AG were among 16 of the world’s biggest banks sued by the U.S. Federal Deposit Insurance Corp. for allegedly manipulating the London interbank offered rate from 2007 to 2011.
The FDIC, acting as receiver for 38 failed banks…claimed that institutions sitting on the U.S. dollar Libor panel “fraudulently and collusively suppressed” the rate. Also named in the suit, filed yesterday in Manhattan federal court, is the British Bankers Association, an industry group that oversaw Libor.
Regulators around the world have been probing whether firms colluded to manipulate interest-rate benchmarks including Libor, which affects more than $300 trillion of securities worldwide. Financial institutions have paid about $6 billion so far to resolve criminal and civil claims in the U.S. and Europe that they manipulated benchmark interest rates.
The cost for global investment banks could climb to $46 billion, analysts at KBW, a unit of Stifel Financial Corp., said in a report last year…
The failed banks “reasonably expected that accurate representations of competitive market forces, and not fraudulent conduct or collusion,” would determine the benchmark, the FDIC said in its complaint…
Investigators claim the banks altered submissions used to set the benchmark to profit from bets on interest-rate derivatives or to make the lenders’ finances appear healthier…
The FDIC alleges the banks committed fraud and violated U.S. antitrust laws in fixing the U.S. dollar Libor benchmark. It’s seeking unspecified damages on behalf of the failed banks, including punitive damages and triple damages for price-fixing.
The FDIC still echos the standards of Sheila Bair. It’s been a little while since she left; but, she set critical standards. Required reading for anyone interested in earning a living in finance and still maintaining the odd principle or two her book: Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself.
Within the FDIC and the American banking community she always stands for small banks, community banks vs Wall Street’s version of Gargantua. She sat down and negotiated with the biggest bank presidents as equals and she tried like hell to be more equal than they – even with Congress ready and willing to give away the farm, the treasury and every taxpayer’s contribution to some of the worst examples of American capitalism.
She left the FDIC to work for a spell for the Pew Charitable Trusts; but, banking is what she knows best and she chose to leave the United States to work for a Spanish bank with a cleaner reputation than most of our own. She still asks out loud why no big American bank has ever offered a directorship to a bank reformer like Simon Johnson – or, I’d say, Sheila Bair.
And when she gives a talk to the staff of a bank she used to oversee as regulator – her fee goes to charity. A practice I don’t expect to witness every day from any of our former Congress-critters.