Charles Holliday, Chairman of the Board of Bank of America
The City of Baltimore has filed a lawsuit in Manhattan federal court, alleging that banks deprived the city of millions in investment income by conspiring to fix the London interbank offered rate. Stay with me. Like all aspects of banking except robbery, the Libor is extremely boring. It is the benchmark interest rate at which banks loan money to one another, and it provides the basis for interest calculations on a variety of investments, loans and other financial instruments. When the Libor goes up, banks pay more for cash flow loans, and some investments yield more. When it goes down, banks pay less and some investments yield less. According to Peter Shapiro, an advisor to Baltimore and other municipal investors, “about 75 percent of major cities” have lost money due to Libor manipulation.