Court Ruling Doesn't Deter Multistate LIBOR Probe

Court Ruling Doesn't Deter Multistate LIBOR Probe

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 appeal. 
"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 University. 
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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