It’s hard to find a commercial property lease or purchase finance calculation that doesn’t touch the LIBOR interest rate in some way. The benchmark interest rate is used so commonly, the total transactions subject to it is estimated in the trillions of dollars.
As I’ve written before, LIBOR lurks in so many corners of commercial real estate, it’s big news when the banks responsible for the rate’s publishing are suspected of rigging the number.
And it’s even bigger news when the US government’s biggest insurer of bank deposits — the FDIC — takes those banks where the US Justice Department won’t: to court. Which is exactly what happened this afternoon:
The FDIC, acting as receiver for 38 failed banks including Washington Mutual Bank, IndyMac Bank FSB and Colonial Bank, claimed that institutions sitting on the U.S. dollar Libor panel “fraudulently and collusively suppressed” the U.S. Libor rate. Also named in the suit, filed today in Manhattan federal court, is the British Bankers Association, an industry group.
The failed banks “reasonably expected that accurate representations of competitive market forces, and not fraudulent conduct or collusion,” would determine the benchmark, the FDIC said in its complaint.
Regulators around the world have been probing whether firms colluded to manipulate interest-rate benchmarks including Libor, which affects more than $300 trillion of securities worldwide. Financial institutions have paid about $6 billion so far to resolve criminal and civil claims in the U.S. and Europe that they manipulated benchmark interest rates.
The cost for global investment banks could climb to $46 billion, analysts at KBW, a unit of Stifel Financial Corp., said in a report last year. JPMorgan Chase & Co. and HSBC Holdings Plc may face a European Union complaint as soon as next month from the bloc’s antitrust chief.
Better late than never — and with TBTF banking’s massive influence over US and international law, “never” was certainly in the cards.