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US Attorneys General Jump On The Lieborgate Bandwagon; 900,000+ Lawsuits To Follow, And What Happens Next?

Tyler Durden's picture


The second Barclays announced its $450 million Libor settlement, it was all over - the lawyers smelled not only blood, but what may be the biggest plaintiff feeding frenzy of all time. Which is why it was only a matter of time: "State attorneys general are jumping into the widening scandal over whether banks tried to manipulate benchmark international lending rates, a move that could open a new front against the top global banks. A handful of state attorneys general said they are looking into whether they have jurisdiction over the banks, and are starting preliminary discussions to determine what kind of impact the conduct involving the Libor rate may have had in their states."

From Reuters:

"Our office is aware of the allegations around the manipulation of the Libor, and we are working with other state agencies to determine whether Massachusetts has suffered any losses as a result," a spokesman for Massachusetts Attorney General Martha Coakley said. A spokesman for Florida Attorney General Pam Bondi said his office is aware of the recent settlement reached by British bank Barclays with U.S. and UK authorities and "will look at the case to the extent that our office might have any jurisdiction in the matter."


A spokeswoman for the Massachusetts transportation authority, MassDOT, said the agency "is actively investigating its portfolio for the purpose of determining if it was underpaid on its bonds due to the brewing Libor situation," as are many other issuers of debt whose rate is governed by Libor.


Lawyers for several states have had early discussions about whether they might pool investigative resources and launch a broader, multi-state effort, but no formal consortium has been established yet, people familiar with the discussions said. New York might be expected to lead such an effort, since most of the banks' U.S. operations are based there. A spokesman for the New York attorney general declined comment on whether the issue is being looked at.


Some municipalities, including the city of Baltimore, and funds including the Frankfurt-based Metzler Investment GmbH, which manages 47 billion euros ($59 billion) in assets, have already sued more than a dozen banks, arguing they were bilked of potentially billions of dollars.

How many potential lawsuits are we talking about here? Quite a bit in fact as the FT explains:

There are at least 900,000 outstanding US home loans indexed to Libor that were originated from 2005 to 2009, the period the key lending gauge may have been rigged, investigators have said. Those mortgages carry an unpaid principal balance of $275bn, according to the Office of the Comptroller of the Currency, a bank regulator.

Also, as explained here before, not only is this a legal bonanza, but it will be a political feast for the Congressional circus to earn numerous C-SPAN brownie points.

“I think the US government should be just as aggressive in getting to the bottom of this scandal as the United Kingdom has been,” said Senator Sherrod Brown, chair of the bank regulatory subcommittee on the Senate banking committee.


“This was not isolated to London, but affected tens of millions of investors, borrowers and taxpayers in our country as well,” Mr Brown added.

What does the above mean?

1) Starting today and going forward, there will be numerous essays, "analyses" and white papers, all of which will try to estimate (some on a paid basis) the damages and impact of the Libor manipulation that took place at least in the period under discussion 2005-2009. All of these will be absolutely wrong, as nobody has any clear idea of how the cumulative impact of the Libor rate, which may have been pushed below either lower or higher depending on how it suited a given BBA-member bank, over a period of years will have impacted hundreds of trillions in partially offsetting notional securities. Therefore, while one day it may have led to impairments, another day it would benefit the end-holder of a given interest-rate sensitive product. But they will try. And the bigger the number, the better, which leads us to...

2) The lawyers will crawl out of the woodwork like worms after a torrential downpour, and will all be willing to work on contingency, telling potential clients they are owed thousands, nay, millions based on such and such analysis. All they need is to have held a mortgage, or a credit card, or any variable interest liability in the 4 years in question. And to sign the dotted line.

3) The resulting lawsuits, most of which in class action format, will be of gargantuan proportions, simply to encourage settlement, as ongoing litigation will easily destroy the financial system. The litigation reserves at the TBTF banks will explode and will cause years of EPS writedowns. But at least they will be one-time charges, so the stocks don't get crushed too much. That said, forget any growth out of the banking sector, and certainly the 16 BBA member banks, all of whom are about to be sued to smithereens in civil suits as more and more banks step up and settle to avoid criminal prosecution.

4) The biggest irony is that the torrent of upcoming suits will be in effect targeting none other than the Fed. Because while banks which all were massively levered to even a one basis point move in Libor were very sensitive to the smallest variations in 3 month USD libor, end-clients who did not have this leverage were far less impaired. But that doesn't matter: after all the same clients were impaired through gross borderline criminal negligence which is all that matters in a court of law (assuming the honorable judge John Roberts is not presiding pro hac vice). Thus the entity that will be sued by proxy is the Federal Reserve, whose Federal Funds rate is really the setter for the baseline Libor rate. Note the chart below which shows that over the past decade, the 3M USD Libor and the Fed Funds rate were virtually interchangeable:

Yet while it was the Fed's decisions at the bottom of it all, unless someone implicates the Fed or the BOE further, both will get away scott free: after all what they do is public policy, for the public good and to defend their various appointed mandates. And neither pushed banks to manipulate their rates (even if both were well aware there was gambling going on here), or so they claim, even when presented with evidence to the contrary.

What will really happen, is that the private banks, having been bailed out by the central banks at the taxpayers' dime, will now serve as a buffer to protect these same institutions from rising popular anger, not just at Lieborgate, but Robosigning, Robosettlement, CDOs, rehypothecation, High Frequency Trading, toxic assets marked-to-unicorns, the end of Mark-to-Market, ZIRP, NIRP, expert networks, insider trading, MF Global, and countless other examples of what happens when financial fraud is let loose with no fear of consequence in a Bernanke Put world.

As a result, the status quo will literally buy itself a few more years as it delays the tipping point by any means necessary, in the process kicking back a little to politicians, lawyers, and the general public in exchange for a few years of subpar earnings for bank shareholders that should have been wiped out back in 2008 anyway. And everyone will be happy.

That's how Lieborgate will play out.


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Wed, 07/11/2012 - 22:59 | 2608767 newengland
newengland's picture

Kerching! Well spotted.

The world is a contest of ideas, and experience is the best teacher, although perhaps the toughest task master.

Only the thinking and actions of the BIS determine the fate of international banking. The BIS appears to be in the mood to punish arrogant hirelings. See Barclays for the most recent example of what happens to a Diamond geezer when he gets too uppity and the hidden hand moves forces against him.

Wed, 07/11/2012 - 22:43 | 2608733 IMA5U
IMA5U's picture

Timing is everything


Smear the bankers   And if the world implodes blame them

Wed, 07/11/2012 - 22:44 | 2608735 EmmittFitzhume
EmmittFitzhume's picture

Lawyers kill banks. Without banks lawyers die.The perfect storm!

Wed, 07/11/2012 - 22:54 | 2608760 Atomizer
Atomizer's picture



Results of the 2011 EBA EU-wide stress test: Barclays 

The Committee of European Banking Supervisors (CEBS)- Banking Stress Tests 

Imagine the lies will be hard to explain under simple math models. Further banking failures will become more Centrally planned fallout. This event has been manufactured by design. Project blowback is a bitch to counter when a bullet is never fired.


Wed, 07/11/2012 - 22:54 | 2608761 Youri Carma
Youri Carma's picture

First seeing then believing.

Getting a bit sick of all those hefty headlines which go out like a night candle.

Wed, 07/11/2012 - 22:56 | 2608770 pragmatic hobo
pragmatic hobo's picture

calling Mr holder, come in Mr holder ... hello?

Wed, 07/11/2012 - 23:02 | 2608784 travellerev
travellerev's picture

Sign this Avaaz petition if you think the banksters should go to jail for their crimes!

Wed, 07/11/2012 - 23:09 | 2608800 Michelle
Michelle's picture

Anybody with a sliver of a brain should be able to figure this out. The banksters ALWAYS win, they wanted to get caught AND they want to take you to the cleaners via higher rates. WAKE UP PEOPLE, YOU'RE BARKING UP THE WRONG TREE!

Wed, 07/11/2012 - 23:10 | 2608802 Dr.Engineer
Dr.Engineer's picture


I have a plan to get the bastards but I need your help (I will make it easy).  Those of you in the US, contact the Democrat or Republican state election committees in your state and tell them that if they want to win the election, they need to say they are going to stand up for the little guy and get the big banks who ruined our economy.  Libor is the new thing that should catch their ear.  Maybe we can start  a bidding war in the political arena on the number of bankster foreskins ...

I just sent the email below for my state.  If you have contacts in these organizations then feed the info to them directly.  Feel free to reuse / edit / rewrite ... but have at it.  Oh and replace the <INSERT PARTY> and <INSERT OTHER PARTY> with the names of the parties.


The independent voter is told that <INSERT PARTY> are for big business and against the little guy, with the hope to persuade the voter that the <INSERT PARTY> party will not be on their side.  This false message needs to be countered in a forceful way that highlights the <INSERT OTHER PARTY> hypocrisy of this talking point.  The LIBOR scandal in Britian is an opportunity to do just that for the NC <INSERT PARTY> election campaign; really, for all NC states and the national party.

The theme of this approach is for the states to band together (like multiple AG in the Obamacare fight) to sue the big New York banks (e.g., JP Morgan, Morgan Stanley, etc.) so that these banks:  (1) can be prosecuted for the fraud that caused the economic collapse of 2008, as well as (2) have their state retirement funds compensated for these crimes.  Everyone hates the big banks for what happened in 2008 and everyone is likewise angry that no one has gone to jail!  The political party that goes after these criminals will curry favor with everyone, just by saying that they will do something to bring about justice.  The Obama administration has done nothing and the public is internally seething.

The Libor scandal is the smoking gun that points to these criminals because Libor is what sets the interest rate on home/car/personal loans.  It is a huge story in London, England and some of the financial press but is has been ignored by the mainstream media in the US. 

Here is some background information about why Libor is important (blatantly plagiarized from multiple web sites).

What Is Libor?  Libor is the London Inter Bank Offered Rate.  A recent Washington Post article ( contained a pretty good explanation of what that means....

In the simplest terms, LIBOR is the average interest rate which banks in London are charging each other for borrowing. It’s calculated by Thomson Reuters — the parent company of the Reuters news agency — for the British Banking Association (BBA), a trade association of banks and financial services companies.


Why Does Libor Matter?  If you have a mortgage, a car loan or a credit card, then there is a very good chance that Libor has affected your personal finances.  Libor has been a factor in the pricing of hundreds of trillions of dollars of loans, securities and assets.  The following is from a recent article by Maureen Farrell....

These traders influenced the pricing of the London Interbank Offered Rate or Libor, a benchmark that dictates the pricing of up to $800 trillion of securities (yes trillion)

The the Washington Post recently explained....

In the United States, the two biggest indices for adjustable rate mortgages and other consumer debt are the prime rate (that is, the rate banks charge favored or “prime” consumers) and LIBOR, with the latter particularly popular for subprime loans. A study from Mark Schweitzer and Guhan Venkatu at the Cleveland Fed looked at survey data in Ohio and found that by 2008, almost 60 percent of prime adjustable rate mortgages, and nearly 100 percent of subprime ones, were indexed to LIBOR

Who Was Involved In This Scandal?   According to the Daily Mail (  , in addition to Barclays it is being alleged that at least 20 banks (including some major U.S. banks) were involved in this interest rate fixing scandal....

Hundreds of bankers across three continents are embroiled in the interest-rate fixing scandal that has left Barclays chief executive Bob Diamond fighting to save his job.
As pressure intensified on Britain’s highest paid banking boss to quit, MPs heard a string of other financial institutions across the world were under investigation.
At least 20 banks are believed to be under suspicion, with growing demands for a criminal investigation.


What Did They Do?  Employees at Barclays (and apparently at about 20 other major banks) were brazenly manipulating interest rates.  A recent Yahoo Finance article described how this worked...

To help the bank's trading positions between 2005 and 2009, and most notably during the global financial crisis of 2007-09, the bank made false submissions to the Libor-setting committee, which agrees rates daily in London.

At the request of its own traders of interest-rate derivatives, Barclays made false submissions relating to Libor and Euribor (the eurozone benchmark rate). By doing this, Barclays personnel aimed to help their trading colleagues to profit by manipulating Libor.

Rigging the world's leading benchmark for interest rates is pretty serious stuff. Indeed, in the words of the FSA, "Barclays' behaviour threatened the integrity of the rates, with the risk of serious harm to other market participants"

Thu, 07/12/2012 - 05:31 | 2609175 PulpCutter
PulpCutter's picture

They always manipulated so that it was LOWER, though, correct? 

Wed, 07/11/2012 - 23:14 | 2608809 jackinrichmond
jackinrichmond's picture

is it just me or does this whole liborgate thing seem pre-conceived... like it was fed to the public (at this point in time) for a reason..


Thu, 07/12/2012 - 00:22 | 2608936 analyzer_66
analyzer_66's picture

astute observation, sure feels that way to me too, dont forget the news is filtered to the sheeple thru 5 or 6 media giants (GE being one of them, GE has a ginormous financial unit) the big question is how many will be indicted and whenis Mr Holder going to go fishing for banksters like JPM and Goldman??

These banks are the biggest campaign contributors to BOTH parties, this whole financial system takedown is getting right down to exposing the whole system of corruption of state, municipals, central banks, private banks, all governments, police/justice system, all labor unions and their leadership, pension programs, the list goes on,


Wed, 07/11/2012 - 23:17 | 2608815 rsnoble
rsnoble's picture

In answer to this threads title "what's going to happen?" here is what's going to happen: You and I are going to receive a class action lawsuit check in the amount of 50 fucking cents sometime in the future, a bunch of Harvard Lawyers get rich, and a bunch of fucking banksters that should by all rights have their fucking heads cut off get dropped off on Fantasyfuckingisland.

That is what's going to happen.

Wed, 07/11/2012 - 23:23 | 2608828 monad
monad's picture

Its a trick. Get an ax.

You know if they are backing this, they are going to try to sneak something major through.

Wed, 07/11/2012 - 23:30 | 2608835 Cabreado
Cabreado's picture

If you zoom out,

you will see cannibalism in full play.

Such will be our demise,

with nary a real bite taken.

Wed, 07/11/2012 - 23:54 | 2608877 analyzer_66
analyzer_66's picture

5,000 dollars ??  no, try knocking off a zero, very little left after politicans and lawyers lop off their 1/3 each, john q public will get a big sloppy "i'm sorry" from the next president in his first state of the union addr nest year, great gimmick right before we attack iran or return to the gold standard

Thu, 07/12/2012 - 00:15 | 2608917 bidaskspread
bidaskspread's picture

This whole thing is another engine to generate revenues for depleted government coffers. They manipulated LIBOR since 2007 with media coverage about it. Why does it take 5 years for the regulators to do anything about this? Answer: They need the revenue because they are broke. They can’t raise taxes or cut spending because we are in a recession ( i.e politicans need to get elected again). To cover the shortfall they sue for things they knew about for years ago. Here is another potential item to sue for; Banks manipulated housing prices by colluding not to push excess supply into the market. Investors were misled of the fair value of the asset with loans originated after 2008. Borrowers and property owners could claim they paid too much money in property taxes or bought an REO on fraudulent terms. They can fine these TBTF billions, and it doesn't matter, why because at the end of the day they'll make you and I eat it through fees, manipulation of commodity prices and interest rates. Until TBTF is resolved, this is no more than a backdoor tax; which is exactly why nothing is being done to resolve this issue. I will be surprised if any bank goes under because of this, but I will bet that certain government positions on the chopping block are saved for the near term.

Thu, 07/12/2012 - 00:37 | 2608972 Bobportlandor
Bobportlandor's picture

Thank you! You saved me a ton of time.

Thu, 07/12/2012 - 00:19 | 2608928 Dr. Engali
Dr. Engali's picture

"As a result, the status quo will literally buy itself a few more years as it delays the tipping point by any means necessary, in the process kicking back a little to politicians, lawyers, and the general public in exchange for a few years of subpar earnings for bank shareholders that should have been wiped out back in 2008 anyway. And everyone will be happy."

Fuck I don't want to wait a few more years. I want it to fall apart now. Oh well just keep stacking I guess.

Thu, 07/12/2012 - 00:26 | 2608945 JohnKozac
JohnKozac's picture
Banking Law

Baltimore Leads Federal Court Battle over Borrowing Benchmark Known as Libor


The city of Baltimore is at the forefront of a federal court battle alleging banks artificially depressed a benchmark rate for borrowing, leading to large losses for cities that entered into interest rate swaps.

The plan can backfire DealBook explains. “If Libor is artificially lowered, the municipality is stuck paying the same fixed rate, but it receives a smaller variable payment from its bank.” Peter Shapiro, who advises Baltimore and other cities on the use of such swaps, says state and local governments lost money because of the manipulation. "The number is likely to be very, very big," he said.

Thu, 07/12/2012 - 00:44 | 2608970 Bunga Bunga
Bunga Bunga's picture

250 million Euro fraud by Rothsinvest director Robert Da Ponte:

"RothsInvest Asset Management AG is a Switzerland-based professional investment management firm, backed by the Rothschild family office."


Thu, 07/12/2012 - 00:47 | 2608988 GoodMorningMr.V...
GoodMorningMr.VanRumpoy...'s picture

Good post! ^

Thu, 07/12/2012 - 01:03 | 2609002 Bunga Bunga
Bunga Bunga's picture

I just found that even the Rothschild reference is some sort of scam. It has nothing to do with the Rothschild banker dynasty or a Rothschild bank but a lawyer from Zurich named Nathan Rothschild (not related), who is president of the board of Rothsinvest.



Thu, 07/12/2012 - 00:46 | 2608985 GoodMorningMr.V...
GoodMorningMr.VanRumpoy...'s picture

Spreading the wealth around?

The ensuing class action will Work better  at that than taxes ever did.

Thu, 07/12/2012 - 00:59 | 2609004 alien-IQ
alien-IQ's picture

If U.S. law applied to banks...I'd believe these law suits stood a chance in hell. But let's face it, it's gonna be a wrist slap with no admission of guilt and a continuation of business (AKA "Fraud") as usual.

Same as it ever was.

We're past being fucked. We're pregnant with demons. The new symbol for America should be the movie poster for "Rosemary's Baby".

Thu, 07/12/2012 - 07:36 | 2609323 Sandmann
Sandmann's picture

RICO applies to Banks - it has never been applied to The Mob

Thu, 07/12/2012 - 01:20 | 2609031 Dead Canary
Dead Canary's picture

Soo.... The blood sucking lawyers will be working for US for a change. Irony is so ironic.

Thu, 07/12/2012 - 02:15 | 2609076 dcb
dcb's picture

no need to worry, just like before obama will come to the rescue and announce a blue ribbon panel in a press conference, promise hope and change, say the publc is being served then do nothing behind closed doors nd let teh banks off the hook.


not that romney would be better, but I've seen the obama play book a bit to often to not know how this plays out.

Thu, 07/12/2012 - 02:33 | 2609090 CustomersMan
CustomersMan's picture


Where To Start:  My View

An easier calculation is possible and that is to see on how many occasions there were positions "put-on" by the banks, that then turned profitable after the "rate-changed" and when the trades were closed out and how much money they made, including their friends and co-conspirators. This would be an easier first step.


Later you could look at who they harmed deliberately by raising or lowering the rates, knowing what positions they were holding. In other words they may have used the rate changes to exact revenge or to eliminate competitors.


Also, who they deliberately helped out, by making the "positions" profitable. I'm sure they knew where the biggest positions were being held, and who would stand to "gain" by a certain "rate-move".

Thu, 07/12/2012 - 02:37 | 2609092 slackrabbit
slackrabbit's picture

And as with all bankruptcies, eventually there is a fallout amoung the creditors...

Thu, 07/12/2012 - 02:54 | 2609097 TPTB_r_TBTF
TPTB_r_TBTF's picture

Blaming the Banks and Bankers is a big part of TPTB Plan.

TPTB want a big change to happen soon. 

What better way to implement a huge change

than by sacrificing the existing banking system and

then "they" offer us up a brand-new-and-improved "solution"?

(after all: it is "their" banking system, "they" can do whatever "they" want with it.)


I am always amazed at how clever TPTB are:

They have enlisted the cooperation of attorneys nationwide to help tear down the current system

so that "they" can replace it for us with a "better" system.

"Never let a good crisis go to waste!", 'they' always say.



Thu, 07/12/2012 - 03:23 | 2609115 Duke of Con Dao
Duke of Con Dao's picture

ok, I'm late to the party. but hey, I brought the beer.

ok, maybe not that but at least the goods... did you say Libor, Bank of England...  ALWAYS good for a Laugh! 

YouTube - Squirm Worm, Squirm! Chairman Paul Tucker roasted by Parliament Inquiry over LIBOR Manipulations

YouTube - Rare Footage of Banker on Hot Seat - MP Asks Barclay's Diamond: Are you Complicit or Incompetent


Thu, 07/12/2012 - 03:33 | 2609123 ripper
ripper's picture

Short UJ,AJ,CJ AND EJ all hitting targets. Week long analysis and charts stressed on how the contracting yield spread between US and Japanese bonds will ultimately override all stimulus and asset purchase that Japan does. That is what happened today and hence all yen pairs hit targets. Now we wait for Gold to hit targets.

Thu, 07/12/2012 - 03:47 | 2609134 mt paul
mt paul's picture

QE Libor....

Thu, 07/12/2012 - 04:00 | 2609143 falak pema
falak pema's picture

Hahaha, Having law suits makes the lawyers richer and the bankers have more time to kick the can and bribe the judges.

Classical diversionary play. Say out front "we will get ALL the crooks in one fell swoop."


Then you make the game so complex and bogged down in paperwork that you get no one!

Oh the irony of Crony capitalism and false flag diversionary tactics. 

Thu, 07/12/2012 - 05:33 | 2609176 PulpCutter
PulpCutter's picture

The banks always manipulated it so that it was LOWER, correct?  These reports never mention that - they keep implying that borrowers paid more, but the fact is they paid less.

As usual, it was only the (responsible) savers who were screwed.

Thu, 07/12/2012 - 06:07 | 2609190 nathan1234
nathan1234's picture

Now the lawyers are there to rip off anything left by the bankers.

Just a crook pecking order which includes the politicians and the bureucracy.


Thu, 07/12/2012 - 06:16 | 2609192 localpacific
localpacific's picture

great read by ZH and obviously this will change trade levels Trade Levels And Alerts

Thu, 07/12/2012 - 06:21 | 2609194 Thoresen
Thoresen's picture

When economies are growing none of this seems to matter to TPTB.

As economies collapse, the collapse is accelerated by those trying to recover their pound of flesh. Lawyers will get their fees as the ship goes down.

Watched a Newsnight debate last night where one economist professor from Surrey University was arguing that there needs to be a State investment bank to lend to businesses. No one in the msm has yet raised the effects of fractional reserve banking. WIth a current reserve requirement of 3% every £1000 or $ pushed out into the economy by a state investment bank will circulate and generate free  circa £30000 in the long run for the other banks to have lent out and to be charging interest on. The whole ponzi scheme of debt has been stretched to the absolute limit, and the current academics (non-Austrian School) only know about a 100% debt on printed paper system.

Thu, 07/12/2012 - 06:35 | 2609204 I am Jobe
I am Jobe's picture

Yeap More Blow Jobs and nothing will be solved as usual. It's gonna be years before the crap in the Western World gets fixed.

Thu, 07/12/2012 - 06:41 | 2609206 j0nx
j0nx's picture

Oh please. They will all be bought off like they were with fraudclosure. Promised gigs at GS or JPM when they retire or cushy governor jobs or senator/congressman jobs. This entire country is a scam and there is no justice for the people unless they take it themselves which aint even close to happening. Nothingburger with cheese.

Thu, 07/12/2012 - 08:11 | 2609403 DonGenaro
DonGenaro's picture

What comes next ?
Cover-ups, dismissals, pardons, and bonuses.

Thu, 07/12/2012 - 08:37 | 2609476 torak
torak's picture

Monetary transfer from banks to government, followed by a monetary transfer from tax payer to banks.

What the fuck else is new?

Thu, 07/12/2012 - 09:05 | 2609551 Widowmaker
Widowmaker's picture

If attorney generals lack jurisdiction in their own jurisdictions then one can almost already hear the shooting of fraud-executives in the head.

Justice is a rigged market too.


Thu, 07/12/2012 - 10:08 | 2609734 robertsgt40
robertsgt40's picture

This will, at best, go the way of the mortgage fraud settlement.  The tag team effort between the federales and the banks is too obvious.

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