Sep 3, 2012
Some board members of the Denver Public Schools are pushing their district to sue two big Wall Street banks, Morgan Stanley and Bank of America, for cheating them of millions of dollars. These banks had sold the school district 750 million dollars in complex financial instruments, supposedly to help meet shortfalls in the school district’s pension plan.
As has since been revealed, Morgan Stanley and Bank of America had conspired to hold down the interest rates – lowering the payments they were supposed to make to schools. That interest rate is set according to LIBOR (London Interbank Offering Rate). This summer, another big bank, Barclays, was fined 453 million dollars by U.S. and British authorities for reporting that LIBOR was lower than what it really was for many, many years. It soon came out that all the other major banks were doing the same thing, manipulating LIBOR for their own benefit – often with the encouragement or at least knowledge of the chief regulatory agencies, such as the U.S. Treasury and Federal Reserve.
The Denver Public Schools and the pension funds of the school district are not alone in being cheated out of millions of dollars by Wall Street. Wall Street banks sold the same kind of complex financial instruments to countless municipalities and school districts all over the country, putting most of them deep in debt.