Last week we discussed the gradual unraveling of a topic we had been following for the past 3 years, namely the brazen and criminal manipulation in the Libor market, which directly and indirectly impacts a stunning $350 trillion worth of securities (and thus, their implied risk, and hence, prices). Today we are delighted to learn that the retribution against these banks who have been artificially representing to the market that they are in better condition than in reality (courtesy of Libor's "strict" self-reporting approach), are beginning to see lawsuits filed against them, with Schwab merely the latest out of the gate. And just as fraudclosure was the litigation topic of 2010 and 2011, sit down and watch as Li(E)borgate explodes into the biggest litigation pain for banks, with litigation expenses that could easily surpass both the robosigning scandal (and its robo-settlement) and the escalating banks Reps and Warranties scandal. Because as recent evidence confirms, there are likely emails proving manipulation exists black on white, as discussed last week. Which means that the case of Schwab, noted last summer by Reuters, is about to become a pandemic.
Charles Schwab Corp, the discount brokerage and money manager, has filed two lawsuits accusing 11 major banks of conspiring to manipulate Libor, which is used to set interest rates on hundreds of trillions of dollars of securities.
According to complaints filed Tuesday with the U.S. District Court in San Francisco, where Schwab is based, the banks violated antitrust, racketeering and securities laws by teaming up to depress the London Interbank Offered Rate, a floating benchmark for what banks charge each other on short-term loans.
Schwab's lawsuits said the collusion deprived it of returns on tens of billions of dollars of Libor-based investments that the company and eight of its money market and ultra-short term bond mutual funds made from 2007 to early 2011.
"Surreptitiously bilking investors of their rightful rates of returns on their investments, defendants reaped hundreds of millions, if not billions, of dollars in ill-gotten gains," Schwab said. Its lawsuits seek unspecified actual and punitive damages, which Schwab said can be tripled under federal law.
Who is being sued? Why everyone's favorite bailed out (alleged) criminals of course:
Defendants include the three largest U.S. banks -- Bank of America Corp, JPMorgan Chase & Co and Citigroup Inc. Others include Barclays Plc, Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings Plc, Lloyds Banking Group Plc, Royal Bank of Scotland Group Plc, UBS AG and WestLB AG. Bank of America spokesman Lawrence Grayson declined to comment, but Citigroup spokeswoman Danielle Romero-Apsilos said: "We believe the lawsuits are without merit." JPMorgan did not immediately respond to a request for comment.
We wonder as a result of all these lawsuits how long until the BBA (allegedly) criminal syndicate will indicate USD Libor continues to decline even as the ECB's borrowings under the FX swap facility are back at two and a half year highs. At the end of the day, is it too much to ask to have at least one market metric that is not manipulated or otherwise the subject to outright fraud?