The Community Bank & Trust of Sheboygan, Wisconsin, filed a RICO lawsuit in May against mega-banks' manipulation of interest rates, naming Bank of America Corp., JPMorgan Chase, Citigroup, and others, for their rigging of LIBOR, and demanding compensation for damages. The Sheboygan bank deliberately couched its filing as a class-action suit, done by the Boston law firm of Shapiro Haber & Urmy, to invite the participation of other local, independent banks, which are up in arms against Wall Street and City of London mega-bailouts and destruction of the physical economy. The RICO statute refers to the mob-busting U.S. Racketeer Influenced and Corrupt Organizations Act.
The Sheboygan bank's national initiative comes amidst a raft of state and local investigations, legal and political actions against the trans-Atlantic banking cartel, for trillions of dollars in losses and looting imposed on communities. Hospitals, towns, pension funds, state governments and many other entities are activating.
On July 12, the Sheboygan bank suit was consolidated with three other proposed LIBOR class-action suits that charge the mega-banks of violating anti-trust laws, with U.S. Federal Court Southern District of New York as the venue, under Judge Naomi Buchwald.
In particular, the Sheboygan bank claims that the low-rigging of LIBOR lost Sheboygan $64,000 in interest income on $8 million floating-rate loans in 2008 (if the LIBOR rate was depressed by just 80 points that year). Multiply $64,000 annual loss times 7,000 U.S. community banks (defined as having assets of less than $1 billion), and there are $448 million in estimated damages for the year of 2008 alone. Four years of this, and the damage rate is nearly $2 billions. The president of the Community Bankers of Wisconsin, Darull Lund, said that small banks need to consider "legal and all other means available."
Hundreds of localities, as well as many state governments, are now meeting to confer on the same thing, namely, how were we bilked, and what will we do. Nationwide, an estimated three-quarters of all major cities hold interest-rate swaps.
In Massachusetts July 18, state Attorney General Martha Coakley and other state leaders will meet, for the purpose, as State Treasurer Steven Grossman said, to "take an inventory of every conceivable pool of assets and financial instruments" that might have been hurt by the LIBOR-rigging.
In New York and Connecticut, a joint probe into LIBOR-rigging has been ongoing for six months by New York Attorney General Eric Schneiderman and Connecticut Attorney General George Jepson. The focus so far for both is on the fact that state agencies directly bought interest-rate swaps, and so did municipalities in these states, whose fiscal and social condition were sharply hurt by deliberate LIBOR-manipulation.
In Nassau County, New York, LIBOR rate-rigging may have cost the county $13 million, based on swaps associated with $600 million of outstanding bonds, according to Comptroller George Maragos.
In California, officers at CALPERS (California Public Employees Retirement System), the nation's largest pension fund, are determining the size of their losses from LIBOR-manipulation.
Hundreds of community hospitals are now scrutinizing their books for how they have been undercut by the LIBOR-rigging. Over 500 nonprofit hospitals nationwide, one in six of the total, are involved in interest rate swaps.