Houston, We Have a Libor Problem

Houston and Sacramento County join the swell of cities suing banks for Libor manipulation.

(July 24, 2013) — Houston and Sacramento County have become the latest claimants to file a lawsuit against some of the world’s largest banks over the manipulation of the London Interbank Offered Rate (Libor).

The City of Houston has sued 17 major banks in the Texas federal court on July 23, alleging their manipulation of Libor had artificially suppressed its returns on $1.1 billion in interest rate swap agreements.

The Texas city is seeking unspecified damages for both receiving artificially low interest and paying artificially high rates on investments dating back six years, according to a report on Bloomberg.

The city can sue for three times the damages under the federal anti-trust law, leading the Houston Business Journal to estimate the damages were likely to be around $21 million.

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The Sacramento suit meanwhile, was also filed on July 23, and accuses Bank of America, Barclays, JPMorgan Chase and others of gaining profits at the county’s expense by influencing the interest rate.

Sacramento has become the 15th government agency in California alone to file over Libor claims this year.

Other plaintiffs include the University of California, the cities of Richmond and Riverside, and an association covering San Diego County and 18 of its cities.

Nanci Nishimura of Bay Area law firm Cotchett Pitre & McCarthy told local newspaper the Sacramento Bee that her clients were “cheated” when Libor was artificially suppressed.

According to the lawsuit, Sacramento County entered into an interest rate swap with several banks, including Deutsche Bank, Bear Stearns, Morgan Stanley, Merrill Lynch, and Bank of America.

The loans made were at a rate tied to Libor, and since Libor was artificially pushed down, the county got less money, Nishimura said.

“When Libor was supressed, they were cheated,” she added.

Baltimore, Los Angeles and San Diego County have also filed suits in recent months.

There are also several class action lawsuits based in the Southern District of New York on appeal, after a judge ruled that the federal anti-trust law did not apply to these cases and dismissed it the original filing.

Regulators have already fined three big banks–Barclays, UBS, and Royal Bank of Scotland–a combined $2.5 billion in the past year for manipulating Libor and other key rates.

Related Content: The Libor Scandal ‘Obsession’: Is It Justified? and Judge Throws Libor Claims Out of Court  

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