LIBOR Ruling Good for Investors, Bad for Customers

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

For those Fools who hoped the LIBOR manipulation scandal might finally confront the sins of big banking, a judgment Friday brought a swift disappointment. A judge ruled that the collusion of 20 banks to rig the worldwide interest rate did not violate U.S. antitrust laws. In doing so, she effectively ended a majority of the private lawsuits brought against the 16 banks involved in the scandal.

As I wrote in January, regulation and fines would have little impact on the banks involved in the rate manipulation. Deutsche Bank (NYSE: DB  ) was found to have made at least $654 million profit in 2008 due to a rate change. It puts the fines of the other banks in perspective: Barclays' $467 million fine, UBS's $1.5 billion and Royal Bank of Scotland's $612 million.

Any impetus for change would have been led by private lawsuits, and several were filed over the past year. Lawsuits in California, New York and Illinois all alleged significant financial damages as a result of the rate manipulation. Pensions for teachers and government employees, returns for individual investors, and even mortgage rates for homeowners were all affected by the rate manipulation, claimed the lawsuits. The City of Baltimore, as lead plaintiff, claimed the rate manipulation had cost the city millions of dollars, and that the collusion was a clear violation of antitrust laws.

Early in March, JPMorgan Chase  (NYSE: JPM  ) , Bank of America (NYSE: BAC  ) , and several other banks involved in antitrust lawsuits claimed the rate wasn't competitive, and therefore couldn't violate antitrust laws. The judge agreed.

One bright spot in the scandal: U.K. politicians have called for an improvement of the culture and professional standards in the banking industry, and fines from the banks involved in LIBOR have gone to helping military veterans with combat stress and mental illness.

What does this mean for investors? As I wrote in December, the promise of change to a banking system fraught with financial disasters was encouraging, but actual change would be astounding. The dismissal of the lawsuits proves that change won't come. While banks may stop manipulating LIBOR, the lack of significant prosecution and/or fines proves once again that such chicanery will continue in one form or another. The only question is, what form will it take next?

Bank of America is one of the 16 banks facing LIBOR charges. The Motley Fool has taken a hard look at the challenges facing the large bank and prepared a special report. Download it today; it's free for Fools. 

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2339157, ~/Articles/ArticleHandler.aspx, 9/30/2016 6:32:25 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/30/2016 4:00 PM
BAC $15.65 Up +0.49 +3.23%
Bank of America CAPS Rating: ****
DB $13.09 Up +1.61 +14.02%
Deutsche Bank CAPS Rating: **
JPM $66.59 Up +0.94 +1.43%
JPMorgan Chase CAPS Rating: ****