July 29 The city of Philadelphia is the latest
of a series of U.S. municipalities, following Houston a week
ago, to sue some of the world's biggest banks for financial
losses incurred in the Libor interest-rate rigging scandal.
Philadelphia sued nine banks and several subsidiaries on
Friday in Pennsylvania Federal Court, seeking punitive and other
damages and claiming that the banks' behavior "was nothing short
of naked price-fixing."
Other local governments - including Baltimore, and the
California counties of San Diego and Sacramento - have also sued
in connection with the scandal over manipulation of the London
Interbank Offered Rate, or Libor.
The governments say that rate swap agreements that cities
use to hedge borrowing costs were manipulated by the financial
institutions to their own advantage.
The parent banks named in the Philadelphia complaint are
Bank of America Corp, Barclays Bank Plc,
Citigroup Inc, Credit Suisse Group AG, Deutsche
Bank AG, JPMorgan Chase & Co, Royal Bank of
Canada, Royal Bank of Scotland and UBS AG
The scandal surrounding the Libor, against which trillions
of dollars worth of products ranging from derivatives to
mortgages are priced, has become a symbol of the brazen
arrogance with which some in the financial industry have pursued
their own interests.
The U.S. municipalities claim that they lost money when they
received lower interest rate payments than they should have, or
had to pay artificially inflated rates because of the alleged
Philadelphia also said local governments were forced to pay
"sometimes devastating" penalties to terminate investment
Between 2009 and 2011, the city paid nearly $110 million
altogether in termination fees to various banks to unwind swap
agreements built around interest rates, including the Libor,
according to its complaint.
The complex swaps "have cost state and local governmental
entities hundreds of millions or even billions of dollars,
depleting treasuries, ruining budgets, and hindering the
delivery of public services," Philadelphia said in its lawsuit.
Citigroup and Credit Suisse declined to comment, and a
representative for another bank did not immediately reply to
requests for comment on Monday.
Three banks - Britain's Barclays and RBS and Swiss UBS -
have paid around $2.6 billion to date to secure civil
settlements with regulators in the United States and Britain
over Libor manipulation.