Jun 24, 2013
Six of the largest banking institutions in the U.S. are accused of making interest rates go up and down, to benefit their companies while costing clients more money. JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley – already worth together more than TEN TRILLION dollars – are letting traders make up interest rates with their counterparts in Britain and Switzerland. Why does it matter? Just a tiny fraction of one percent in interest rates on a billion dollars of borrowings would cost a client six million dollars.
Many of those clients are cities, towns, and pension funds. The interest-fixing activities of the big banks hurts their budgets a lot.
Baltimore City is a case in point. It took advice from financial “experts.” These experts claimed that the city would be better off by borrowing money in elaborate schemes known as swaps, when paying for the bonds they sell for maintenance projects. The taxpayers were left holding the higher bill from the banks – just like individuals who were conned in the sub-prime mortgage schemes.
With Baltimore in the lead, the cities, funds and bondholders decided to sue the banks for manipulating LIBOR, because the changes in interest rates cost them millions of dollars. In May, a judge threw out most of the lawsuit, so now the cities, towns, pension funds have to keep paying big bucks to these super-wealthy, super-profitable banking institutions that robbed them in the first place.
And it’s completely legal under this capitalist system.