Last month, U.S. District Judge Naomi Reice Buchwald in
Manhattan threw out a "substantial portion" of the proposed lawsuits
alleging wrongdoing by banks in connection with the London interbank offered
rate, known as the LIBOR. Among the legal actions torpedoed by the judge's
ruling were a class-action suit filed by the city of Baltimore, claiming it
suffered losses on derivatives as a result of the alleged interest-rate
manipulation, and a suit filed by money-management firm Charles Schwab alleging
banks engaged in racketeering.
Despite Buchwald's ruling, 30 states, led by New York and Connecticut, are moving
ahead with their investigation into allegations of interest-rate rigging of the
LIBOR. A spokesman for New York Attorney General Eric Schneiderman said the
ruling "does not have any impact on our multistate probe into losses
incurred as a result of LIBOR...manipulation."
The ruling drew a clear line between enforcement actions and private lawsuits,
stating there were "many requirements that private plaintiffs must
satisfy, but which government agencies need not."
Some legal experts suggested much of the ruling might not actually survive on
"This reflects a judge who doesn't want to spend the rest of her judicial
career dealing with LIBOR cases," said James Cox, a law professor at Duke
But if the ruling does stand, it will significantly reduce the financial cost
of the LIBOR mess on the banks involved. It is likely to be some time, however,
before it is known what that total cost will be.
"This is still in the early innings," said Darrell Duffie, a
professor of finance at Stanford University. It "may be years before we
are able to get a relatively precise estimate of the ultimate total
damages," he said. (WALL STREET JOURNAL)
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