Baltimore Hits Back at the Banks
FILED TO: Economics
From the Guardian:
A little over two years ago, Stephanie Rawlings-Blake had never heard of Libor. The mayor of Baltimore had plenty of other things to keep herself occupied. Elected in 2010, she was dealing with the aftermath of a financial crisis that had left her city with the budget deficit of $120m and the cost of cleaning up the worst two-day snowstorm in the city’s history. And then she found out the credit crunch had come back to take another bite out of the city’s finances.
Baltimore is lead plaintiff in a class action lawsuit that alleges that banks including Barclays, Bank of America, HSBC, JP Morgan and UBS conspired to fix a set of key interest rates – the London Interbank Offered Rate, or Libor – costing the city millions in the process. So far, the Libor scandal has played out mostly under the radar in the US. But now it is gaining traction in Washington, and Baltimore’s suit is putting a human face on a scandal legal experts predict could end up being the most costly of the credit crisis.
Firefighters, services for the elderly, school programmes – all these and more are being cut as a direct result of the actions of colluding bankers, Rawlings-Blake claims.
According to the court documents, Baltimore bought “tens of millions of dollars worth of interest-rate swaps” during the period when the alleged fixing took place. The suit, filed with top Washington law firm Hausfeld, alleges that between August 2007 and May 2010 the defendants conspired to suppress Libor below the levels at which it would have been set had they accurately reported their borrowing costs. Those manipulations had “severe adverse consequences” for Baltimore and others, according to the suit. Other cities are watching carefully and a raft of litigation is expected in the US.
The city had no choice but to fight, said Rawlings-Blake. “We are faced with closing fire companies, closing recreational centers … We have services that have been cut year after year; services that people depend on. Opportunities for young people, the cleanliness of the city: everything is affected by the budget,” she said.
“We can’t afford to leave money on the table,” she said.
Issue 9 of the Banter Magazine is now out! Right now, you can try a membership for only 99 cents!