As Libor scandal losers go to court, winners may not know they won
Lawsuits filed by losers in perhaps Wall Street’s biggest corruption scandal are reportedly piling up on court dockets around the country.
The Wall Street Journal reported Monday that institutional investors, hedge funds and cities are among the plaintiffs filing suits in the growing scandal involving fixing of the London Inter-Bank Offered Rate, or Libor.
Trillions of dollars’ worth of financial products are tied to Libor. Investors or banks may have been cheated out of returns when bankers colluded in recent years to keep rates artificially low.
In June, British banking giant Barclays settled criminal and regulatory investigations by agreeing to pay $450 million to U.S. and British authorities. A number of other major banks are reportedly under investigation in the rate-fixing probes.
As investors and institutions and their attorneys investigate whether they lost money in the Libor scandal, the winners in the scandal may not realize they benefited from the rate-fixing.
Borrowers who took out adjustable-rate mortgages may have benefited from artificially low rates if their loans reset during the financial crisis, when banks pushed down Libor rates to make themselves look healthier, as noted in a July posting by Bankrate.com.
As of May, about 2 million adjustable-rate prime and sub-prime mortgages were tied to Libor, according to research by an economist at the Federal Reserve Bank of Cleveland.
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