Philadelphia latest U.S. city to sue banks in Libor scandal

Published

Mon Jul 29, 2013 3:38pm EDT

(Reuters) - The city of Philadelphia is the latest of a series of U.S. municipalities, following Houston a week ago, to sue some of the world's biggest banks for financial losses incurred in the Libor interest-rate rigging scandal.

Philadelphia sued nine banks and several subsidiaries on Friday in Pennsylvania Federal Court, seeking punitive and other damages and claiming that the banks' behavior "was nothing short of naked price-fixing."

Other local governments - including Baltimore, and the California counties of San Diego and Sacramento - have also sued in connection with the scandal over manipulation of the London Interbank Offered Rate, or Libor.

The governments say that rate swap agreements that cities use to hedge borrowing costs were manipulated by the financial institutions to their own advantage.

The parent banks named in the Philadelphia complaint are Bank of America Corp, Barclays Bank Plc, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG, JPMorgan Chase & Co, Royal Bank of Canada, Royal Bank of Scotland and UBS AG .

The scandal surrounding the Libor, against which trillions of dollars worth of products ranging from derivatives to mortgages are priced, has become a symbol of the brazen arrogance with which some in the financial industry have pursued their own interests.

The U.S. municipalities claim that they lost money when they received lower interest rate payments than they should have, or had to pay artificially inflated rates because of the alleged manipulation. Philadelphia also said local governments were forced to pay "sometimes devastating" penalties to terminate investment agreements.

Between 2009 and 2011, the city paid nearly $110 million altogether in termination fees to various banks to unwind swap agreements built around interest rates, including the Libor, according to its complaint.

The complex swaps "have cost state and local governmental entities hundreds of millions or even billions of dollars, depleting treasuries, ruining budgets, and hindering the delivery of public services," Philadelphia said in its lawsuit.

Citigroup and Credit Suisse declined to comment, and a representative for another bank did not immediately reply to requests for comment on Monday.

Three banks - Britain's Barclays and RBS and Swiss UBS - have paid around $2.6 billion to date to secure civil settlements with regulators in the United States and Britain over Libor manipulation.

Reuters LIBOR Scandal (pdf)

Everything Is Rigged : The Biggest Price Fixing Scandal Ever

Published

The Illuminati were amateurs. The second huge financial scandal of the year reveals the real international conspiracy: There's no price the big banks can't fix.

by MATT TAIBBI

APRIL 25, 2013

Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world's largest banks may be fixing the prices of, well, just about everything.

You may have heard of the Libor scandal, in which at least three – and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that's trillion, with a "t") worth of financial instruments.

When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it "dwarfs by orders of magnitude any financial scam in the history of markets."

That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world's largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world's largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.

Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It's about a $379 trillion market,meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.

It should surprise no one that among the players implicated in this scheme to fix the prices of interest-rate swaps are the same megabanks – including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland – that serve on the Libor panel that sets global interest rates. In fact, in recent years many of these banks have already paid multimillion-dollar settlements for anti-competitive manipulation of one form or another (in addition to Libor, some were caught up in an anti-competitive scheme, detailed in Rolling Stone last year, to rig municipal-debt service auctions). Though the jumble of financial acronyms sounds like gibberish to the layperson, the fact that there may now be price-fixing scandals involving both Libor and ISDAfix suggests a single, giant mushrooming conspiracy of collusion and price-fixing hovering under the ostensibly competitive veneer of Wall Street culture.

The Scam Wall Street Learned From the Mafia

Why? Because Libor already affects the prices of interest-rate swaps, making this a manipulation-onmanipulation situation. If the allegations prove to be right, that will mean that swap customers have been paying for two different layers of price-fixing corruption. If you can imagine paying 20 bucks for a crappy PB&J because some evil cabal of agribusiness companies colluded to fix the prices of both peanuts and peanut butter, you come close to grasping the lunacy of financial markets where both interest rates and interest-rate swaps are being manipulated at the same time, often by the same banks.

"It's a double conspiracy," says an amazed Michael Greenberger, a former director of the trading and markets division at the Commodity Futures Trading Commission and now a professor at the University of Maryland. "It's the height of criminality."

The bad news didn't stop with swaps and interest rates. In March, it also came out that two regulators – the CFTC here in the U.S. and the Madrid-based International Organization of Securities Commissions – were spurred by the Libor revelations to investigate the possibility of collusive manipulation of gold and silver prices. "Given the clubby manipulation efforts we saw in Libor benchmarks, I assume other benchmarks – many other benchmarks – are legit areas of inquiry," CFTC Commissioner Bart Chilton said.

But the biggest shock came out of a federal courtroom at the end of March – though if you follow these matters closely, it may not have been so shocking at all – when a landmark class-action civil lawsuit against the banks for Libor-related offenses was dismissed. In that case, a federal judge accepted the banker-defendants' incredible argument: If cities and towns and other investors lost money because of Libor manipulation, that was their own fault for ever thinking the banks were competing in the first place.

"A farce," was one antitrust lawyer's response to the eyebrow-raising dismissal.

"Incredible," says Sylvia Sokol, an attorney for Constantine Cannon, a firm that specializes in antitrust cases.

All of these stories collectively pointed to the same thing: These banks, which already possess enormous power just by virtue of their financial holdings – in the United States, the top six banks, many of them the same names you see on the Libor and ISDAfix panels, own assets equivalent to 60 percent of the nation's GDP – are beginning to realize the awesome possibilities for increased profit and political might thatwould come with colluding instead of competing. Moreover, it's increasingly clear that both the criminal justice system and the civil courts may be impotent to stop them, even when they do get caught working together to game the system.

If true, that would leave us living in an era of undisguised, real-world conspiracy, in which the prices of currencies, commodities like gold and silver, even interest rates and the value of money itself, can be and may already have been dictated from above. And those who are doing it can get away with it. Forget the Illuminati – this is the real thing, and it's no secret. You can stare right at it, anytime you want. he banks found a loophole, a basic flaw in the machine. Across the financial system, there are places where prices or official indices are set based upon unverified data sent in by private banks and financial companies. In other words, we gave the players with incentives to game the system institutional roles in the economic infrastructure.

Libor, which measures the prices banks charge one another to borrow money, is a perfect example, not only of this basic flaw in the price-setting system but of the weakness in the regulatory framework supposedly policing it. Couple a voluntary reporting scheme with too-big-to-fail status and a revolvingdoor legal system, and what you get is unstoppable corruption.

Every morning, 18 of the world's biggest banks submit data to an office in London about how much they believe they would have to pay to borrow from other banks. The 18 banks together are called the "Libor panel," and when all of these data from all 18 panelist banks are collected, the numbers are averaged out. What emerges, every morning at 11:30 London time, are the daily Libor figures.

Banks submit numbers about borrowing in 10 different currencies across 15 different time periods, e.g., loans as short as one day and as long as one year. This mountain of bank-submitted data is used every day to create benchmark rates that affect the prices of everything from credit cards to mortgages to currencies to commercial loans (both short- and long-term) to swaps.

Gangster Bankers Broke Every Law in the Book

Dating back perhaps as far as the early Nineties, traders and others inside these banks were sometimes calling up the company geeks responsible for submitting the daily Libor numbers (the "Libor submitters") and asking them to fudge the numbers. Usually, the gimmick was the trader had made a bet on something – a swap, currencies, something – and he wanted the Libor submitter to make the numbers look lower (or, occasionally, higher) to help his bet pay off.

Famously, one Barclays trader monkeyed with Libor submissions in exchange for a bottle of Bollinger champagne, but in some cases, it was even lamer than that. This is from an exchange between a trader and a Libor submitter at the Royal Bank of Scotland:

SWISS FRANC TRADER: can u put 6m swiss libor in low pls?...

PRIMARY SUBMITTER: Whats it worth

SWSISS FRANC TRADER: ive got some sushi rolls from yesterday?...

PRIMARY SUBMITTER: ok low 6m, just for u

SWISS FRANC TRADER: wooooooohooooooo. . . thatd be awesome

Screwing around with world interest rates that affect billions of people in exchange for day-old sushi – it's hard to imagine an image that better captures the moral insanity of the modern financial-services sector.

Hundreds of similar exchanges were uncovered when regulators like Britain's Financial Services Authority and the U.S. Justice Department started burrowing into the befouled entrails of Libor. The documentary evidence of anti-competitive manipulation they found was so overwhelming that, to read it, one almost becomes embarrassed for the banks. "It's just amazing how Libor fixing can make you that much money," chirped one yen trader. "Pure manipulation going on," wrote another.

Yet despite so many instances of at least attempted manipulation, the banks mostly skated. Barclays got off with a relatively minor fine in the $450 million range, UBS was stuck with $1.5 billion in penalties, and RBS was forced to give up $615 million. Apart from a few low-level flunkies overseas, no individual involved in this scam that impacted nearly everyone in the industrialized world was even threatened with criminal prosecution.

Two of America's top law-enforcement officials, Attorney General Eric Holder and former Justice Department Criminal Division chief Lanny Breuer, confessed that it's dangerous to prosecute offending banks because they are simply too big. Making arrests, they say, might lead to "collateral consequences" in the economy.

The relatively small sums of money extracted in these settlements did not go toward reparations for the cities, towns and other victims who lost money due to Libor manipulation. Instead, it flowed mindlessly into government coffers. So it was left to towns and cities like Baltimore (which lost money due to fluctuations in their municipal investments caused by Libor movements), pensions like the New Britain, Connecticut, Firefighters' and Police Benefit Fund, and other foundations – and even individuals (billionaire real-estate developer Sheldon Solow, who filed his own suit in February, claims that his company lost $450 million because of Libor manipulation) – to sue the banks for damages.

One of the biggest Libor suits was proceeding on schedule when, early in March, an army of superstar lawyers working on behalf of the banks descended upon federal judge Naomi Buchwald in the Southern District of New York to argue an extraordinary motion to dismiss. The banks' legal dream team drew from heavyweight Beltway-connected firms like Boies Schiller (you remember David Boies represented Al Gore), Davis Polk (home of top ex-regulators like former SEC enforcement chief Linda Thomsen) and Covington & Burling, the onetime private-practice home of both Holder and Breuer.

The presence of Covington & Burling in the suit – representing, of all companies, Citigroup, the former employer of current Treasury Secretary Jack Lew – was particularly galling. Right as the Libor case was being dismissed, the firm had hired none other than Lanny Breuer, the same Lanny Breuer who, just a few months before, was the assistant attorney general who had balked at criminally prosecuting UBS over Libor because, he said, "Our goal here is not to destroy a major financial institution."

In any case, this all-star squad of white-shoe lawyers came before Buchwald and made the mother of all audacious arguments. Robert Wise of Davis Polk, representing Bank of America, told Buchwald that the banks could not possibly be guilty of anti- competitive collusion because nobody ever said that the creation of Libor was competitive. "It is essential to our argument that this is not a competitive process," he said. "The banks do not compete with one another in the submission of Libor."

If you squint incredibly hard and look at the issue through a mirror, maybe while standing on your head, you can sort of see what Wise is saying. In a very theoretical, technical sense, the actual process by which banks submit Libor data – 18 geeks sending numbers to the British Bankers' Association offices in London once every morning – is not competitive per se. But these numbers are supposed to reflect interbank-loan prices derived in a real, competitive market. 

Saying the Libor submission process is not competitive is sort of like pointing out that bank robbers obeyed the speed limit on the way to the heist. It's the silliest kind of legal sophistry.

But Wise eventually outdid even that argument, essentially saying that while the banks may have lied to or cheated their customers, they weren't guilty of the particular crime of antitrust collusion. This is like the old joke about the lawyer who gets up in court and claims his client had to be innocent, because his client was committing a crime in a different state at the time of the offense.

"The plaintiffs, I believe, are confusing a claim of being perhaps deceived," he said, "with a claim for harm to competition."

Judge Buchwald swallowed this lunatic argument whole and dismissed most of the case. Libor, she said, was a "cooperative endeavor" that was "never intended to be competitive." Her decision "does not reflect the reality of this business, where all of these banks were acting as competitors throughout the process," said the antitrust lawyer Sokol. Buchwald made this ruling despite the fact that both the U.S. and British governments had already settled with three banks for billions of dollars for improper manipulation, manipulation that these companies admitted to in their settlements.

Michael Hausfeld of Hausfeld LLP, one of the lead lawyers for the plaintiffs in this Libor suit, declined to comment specifically on the dismissal. But he did talk about the significance of the Libor case and other manipulation cases now in the pipeline.

"It's now evident that there is a ubiquitous culture among the banks to collude and cheat their customers as many times as they can in as many forms as they can conceive," he said. "And that's not just surmising. This is just based upon what they've been caught at."

Greenberger says the lack of serious consequences for the Libor scandal has only made other kinds of manipulation more inevitable. "There's no therapy like sending those who are used to wearing Gucci shoes to jail," he says. "But when the attorney general says, 'I don't want to indict people,' it's the Wild West. There's no law."

The problem is, a number of markets feature the same infrastructural weakness that failed in the Libor mess. In the case of interest-rate swaps and the ISDAfix benchmark, the system is very similar to Libor, although the investigation into these markets reportedly focuses on some different types of improprieties.

Though interest-rate swaps are not widely understood outside the finance world, the root concept actually isn't that hard. If you can imagine taking out a variable-rate mortgage and then paying a bank to make your loan payments fixed, you've got the basic idea of an interest-rate swap.

In practice, it might be a country like Greece or a regional government like Jefferson County, Alabama, that borrows money at a variable rate of interest, then later goes to a bank to "swap" that loan to a more predictable fixed rate. In its simplest form, the customer in a swap deal is usually paying a premium for the safety and security of fixed interest rates, while the firm selling the swap is usually betting that it knows more about future movements in interest rates than its customers.

Prices for interest-rate swaps are often based on ISDAfix, which, like Libor, is yet another of these privately calculated benchmarks. ISDAfix's U.S. dollar rates are published every day, at 11:30 a.m. and 3:30 p.m., after a gang of the same usual-suspect megabanks (Bank of America, RBS, Deutsche, JPMorgan Chase, Barclays, etc.) submits information about bids and offers for swaps.

And here's what we know so far: The CFTC has sent subpoenas to ICAP and to as many as 15 of those member banks, and plans to interview about a dozen ICAP employees from the company's office in Jersey City, New Jersey. Moreover, the International Swaps and Derivatives Association, or ISDA, which works together with ICAP (for U.S. dollar transactions) and Thomson Reuters to compute the ISDAfix benchmark, has hired the consulting firm Oliver Wyman to review the process by which ISDAfix is calculated. Oliver Wyman is the same company that the British Bankers' Association hired to review the Libor submission process after that scandal broke last year. The upshot of all of this is that it looks very much like ISDAfix could be Libor all over again.

"It's obviously reminiscent of the Libor manipulation issue," Darrell Duffie, a finance professor at Stanford University, told reporters. "People may have been naive that simply reporting these rates was enough to avoid manipulation."

And just like in Libor, the potential losers in an interest-rate-swap manipulation scandal would be the same sad-sack collection of cities, towns, companies and other nonbank entities that have no way of knowing if they're paying the real price for swaps or a price being manipulated by bank insiders for profit.

Moreover, ISDAfix is not only used to calculate prices for interest-rate swaps, it's also used to set values for about $550 billion worth of bonds tied to commercial real estate, and also affects the payouts on some A state-pension annuities.

So although it's not quite as widespread as Libor, ISDAfix is sufficiently power-jammed into the world financial infrastructure that any manipulation of the rate would be catastrophic – and a huge class of victims that could include everyone from state pensioners to big cities to wealthy investors in structured notes would have no idea they were being robbed.

"How is some municipality in Cleveland or wherever going to know if it's getting ripped off?" asks Michael Masters of Masters Capital Management, a fund manager who has long been an advocate of greater transparency in the derivatives world. "The answer is, they won't know."

Worse still, the CFTC investigation apparently isn't limited to possible manipulation of swap prices by monkeying around with ISDAfix. According to reports, the commission is also looking at whether or not employees at ICAP may have intentionally delayed publication of swap prices, which in theory could give someone (bankers, cough, cough) a chance to trade ahead of the information.

Swap prices are published when ICAP employees manually enter the data on a computer screen called "19901." Some 6,000 customers subscribe to a service that allows them to access the data appearing on the 19901 screen.

The key here is that unlike a more transparent, regulated market like the New York Stock Exchange, where the results of stock trades are computed more or less instantly and everyone in theory can immediately see the impact of trading on the prices of stocks, in the swap market the whole world is dependent upon a handful of brokers quickly and honestly entering data about trades by hand into a computer terminal.

Any delay in entering price data would provide the banks involved in the transactions with a rare opportunity to trade ahead of the information. One way to imagine it would be to picture a racetrack where a giant curtain is pulled over the track as the horses come down the stretch – and the gallery is only told two minutes later which horse actually won. Anyone on the right side of the curtain could make a lot of smart bets before the audience saw the results of the race.

At ICAP, the interest-rate swap desk, and the 19901 screen, were reportedly controlled by a small group of 20 or so brokers, some of whom were making millions of dollars. These brokers made so much money for themselves the unit was nicknamed "Treasure Island."

Already, there are some reports that brokers of Treasure Island did create such intentional delays. Bloomberg interviewed a former broker who claims that he watched ICAP brokers delay the reporting of swap prices. "That allows dealers to tell the brokers to delay putting trades into the system instead of in real time," Bloomberg wrote, noting the former broker had "witnessed such activity firsthand." An ICAP spokesman has no comment on the story, though the company has released a statement saying that it is "cooperating" with the CFTC's inquiry and that it "maintains policies that prohibit" the improper behavior alleged in news reports.

The idea that prices in a $379 trillion market could be dependent on a desk of about 20 guys in New Jersey should tell you a lot about the absurdity of our financial infrastructure. The whole thing, in fact, has a darkly comic element to it. "It's almost hilarious in the irony," says David Frenk, director of research for Better Markets, a financial-reform advocacy group, "that they called it ISDAfix."

After scandals involving libor and, perhaps, ISDAfix, the question that should have everyone freaked out is this: What other markets out there carry the same potential for manipulation? The answer to that question is far from reassuring, because the potential is almost everywhere. From gold to gas to swaps to interest rates, prices all over the world are dependent upon little private cabals of cigar-chomping insiders we're forced to trust.

"In all the over-the-counter markets, you don't really have pricing except by a bunch of guys getting together," Masters notes glumly.

That includes the markets for gold (where prices are set by five banks in a Libor-ish teleconferencing process that, ironically, was created in part by N M Rothschild & Sons) and silver (whose price is set by just three banks), as well as benchmark rates in numerous other commodities – jet fuel, diesel, electric power, coal, you name it. The problem in each of these markets is the same: We all have to rely upon the honesty of companies like Barclays (already caught and fined $453 million for rigging Libor) or JPMorgan Chase (paid a $228 million settlement for rigging municipal-bond auctions) or UBS (fined a collective $1.66 billion for both muni-bond rigging and Libor manipulation) to faithfully report the real prices of things like interest rates, swaps, currencies and commodities.

All of these benchmarks based on voluntary reporting are now being looked at by regulators around the world, and God knows what they'll find. The European Federation of Financial Services Users wrote in an official EU survey last summer that all of these systems are ripe targets for manipulation. "In general," it wrote, "those markets which are based on non-attested, voluntary submission of data from agents whose benefits depend on such benchmarks are especially vulnerable of market abuse and distortion."

Translation: When prices are set by companies that can profit by manipulating them, we're fucked.

"You name it," says Frenk. "Any of these benchmarks is a possibility for corruption."

The only reason this problem has not received the attention it deserves is because the scale of it is so enormous that ordinary people simply cannot see it. It's not just stealing by reaching a hand into your pocket and taking out money, but stealing in which banks can hit a few keystrokes and magically make whatever's in your pocket worth less. This is corruption at the molecular level of the economy, Space Age stealing – and it's only just coming into view.

 

This story is from the May 9th, 2013 issue of Rolling Stone.

http://www.rollingstone.com/politics/news/everything-is-rigged-the-biggest-financial-scandal-yet-20130425

Biggest Price Fixing Scandal Ever (pdf)

Phila. Sues Big Banks, Alleging Antitrust Violations

Published

By Saranac Hale Spencer

The Legal Intelligencer July 30, 2013

Manipulation of the index used to calculate the interest rate paid by big banks to municipal bond issuers on interest-rate swaps led to sizable losses for Philadelphia and other government entities across the country, the city alleged in a complaint filed in the Eastern District of Pennsylvania.

The suit — filed against Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, JPMorgan Chase, Royal Bank of Canada, Royal Bank of Scotland and UBS — alleges that the banks colluded in order to suppress the London Interbank Offered Rate, which is an index frequently used to set the floating interest rate in the once-popular "fixed-to-floating rate agreements" that banks marketed to municipal entities. The London Interbank Offered Rate is more often called Libor.

"Defendants in this case worked together to suppress Libor, which had the immediate effect of raising the amount paid by the municipal party. This is because, when the banks suppressed Libor, their obligation under the floating-rate arm of the swap was reduced, and thus the net amount the state or local counterparty had to pay increased," according to the complaint from the city of Philadelphia.

"This conduct is nothing short of naked price-fixing," it said.

In the last 20 years, the interest-rate swap system has operated on hundreds of trillions of dollars' worth of state and local bonds, according to the complaint.

Banks pitched the interest-rate swap to municipalities as a way for the issuers of public debt to manage their interest rates, according to the complaint.

The most common swap, called a "plain vanilla" swap, involves an agreement that one party will pay a fixed interest rate on the notional amount, typically the value of the bond, and the other party will pay a floating interest rate on the same notional amount. The floating interest rate is usually based on Libor, according to the complaint.

"For example, an issuer may want to pay the floating rate under a fixed-to-floating rate swap with the goal of incurring lesser borrowing costs by obtaining a lower 'all-in' floating rate than it would otherwise be able to get if it issued the debt directly. Swaps were also promoted as a hedge against dramatic interest rate changes," according to the complaint.

Under the usual rules of the agreements, the municipal agency and the bank are supposed to make their interest payments on the same day so that the payments are "netted," according to the complaint. One party is then considered "in the money," and gets a net payment under the swap, while the other party is "out of the money," according to the complaint.

The city alleges that the banks "artificially and collusively suppressed Libor, which had the effect of secretly tilting the swaps in their favor, causing the banks to be substantially 'in the money' when they did not deserve to be, and effectively raising the losses to the city of Philadelphia and others for these transactions."

They were able to manipulate Libor through their positions on the British Bankers' Association's panel of banks that determines Libor, which is issued daily. The BBA establishes Libor based on submissions from the member banks assessing the rates at which they would be able to borrow in various currencies on London's interbank lending market, according to the complaint. Libor is an average of those rates that is published in various financial newspapers.

The BBA isn't a regulatory agency; rather, it is governed by a board of 12 member banks, according to the complaint.

"The panel banks were supposed to make their Libor submissions as independent actors. Instead, defendants ignored the Libor panel rules and took advantage of the BBA's self-governing structure, making the BBA a de facto cartel," the complaint alleges. "This cartel provided the means through which defendants could suppress Libor."

"As an RBS trader stated to a colleague in a recently released instant message, 'it's just amazing how Libor fixing can make you that much money. ... It's a cartel now in London,'" according to the complaint.

The manipulation of Libor became public in 2011 when UBS disclosed that it had been subpoenaed as part of a government investigation, according to the complaint. Governments around the world had regulatory agencies investigating the scheme; the first results of those investigations were made public in 2012 when settlements with Barclays were announced.

The British bank paid $433.5 million in fines to the U.K. government as part of its settlement, according to the complaint. Barclays also admitted that it had submitted "improperly low" estimates for its borrowing costs to the BBA for Libor, according to the complaint.

Joshua Snyder of Boni & Zack is representing the city of Philadelphia and couldn't immediately be reached for comment.

Spokespeople for Bank of America, Citibank, Credit Suisse, JPMorgan Chase and the Royal Bank of Canada declined to comment.

 Legal Libor (pdf)

Tomgram: Bill McKibben, How Do You Solve a Problem Like the Democrats?

Published

From tomdispatch.com

Posted by Bill McKibben at 4:33pm, April 7, 2013. 


At 72, climate scientist James Hansen is retiring as head of NASA’s Goddard Institute of Space Studies to work even more actively on climate-change issues. Keep in mind that, in congressional testimony in 1988, he first put climate change on the national map. “It is time to stop waffling so much,” he told the congressional committee members, “and say that the evidence is pretty strong that the greenhouse effect is here.” He then went on to suggest a future “probability of extreme events like summer heat waves... and the likelihood of heat wave drought situations in the Southwest and Midwest.” (Any of that sound faintly familiar a quarter-century later?) It was, at the time, a startling statement. Recently, in an email to the members of 350.org, the environmental organization he helped to found, former New Yorker reporter Bill McKibben wrote: “If 350.org has a patron saint, it’s Jim [Hansen]. It was his 2008 paper that gave us our name, identifying 350 parts per million CO2 as the safe upper limit for carbon in the atmosphere.”

That’s no small praise from the writer who, only a year after Hansen spoke up, first put global warming on the map in a popular book, The End of Nature. He was at least a decade or more ahead of the rest of us, and more recently he’s led the popular charge on climate change and especially, in the last year, on trying to block the building of Keystone XL. That’s the pipeline slated to bring tar sands, a particularly “dirty” (and in carbon terms, dirty to produce) form of crude oil from Canada to the U.S. Gulf Coast. Just the other day, as if to provide a little exclamation point on his energetic campaign, during which Hansen has been arrested twice in acts of civil disobedience, a pipeline through which Exxon was already running Canadian “heavy crude” (reputedly a particularly corrosive form of oil) burst in an Arkansas town. The neighborhood affected, according to NPR’s “Morning Edition,” was left “looking like a scene out of the Walking Dead.”

As a scientist and an activist, Hansen has proven a remarkable figure. (He will soon be awarded the prestigeous Ridenhour Courage Prize.) After a February arrest protesting the Keystone pipeline, he told the Washington Post, "We have reached a fork in the road," adding that politicians have to understand that they can "go down this road of exploiting every fossil fuel we have -- tar sands, tar shale, off-shore drilling in the Arctic -- but the science tells us we can't do that without creating a situation... our children and grandchildren will have no control over, which is the climate system."

Recently, there was a striking New York Times portrait of him by Justin Gillis headlined “Climate Maverick to Retire From NASA.” That word “maverick,” while by no means wrong, might be a little deceptive in 2013, since a maverick is a loner, an outlier, and in climate-change terms these days, there is nothing terribly mavericky about Hansen’s suggestions that climate change is likely to radically transform this planet unless we begin to get our greenhouse gas output under control soon. These days, in fact, he’s surrounded by a worried mass of scientists.

In Gillis's piece there was a passage that, despite everything I’ve read, managed to shock me, and I thought it worth citing here before you read TomDispatch regular McKibben’s latest post. Writing about how early Hansen highlighted the dangers of global warming, and how he was doubted at the time, Gillis added, “Yet subsequent events bore him out. Since the day he spoke, not a single month’s temperatures have fallen below the 20th-century average for that month. Half the world’s population is now too young to have lived through the last colder-than-average month, February 1985. In worldwide temperature records going back to 1880, the 19 hottest years have all occurred since his testimony.”

Think about that for a moment and imagine where we’re still going as greenhouse gases continue to pour into the atmosphere at record rates. Tom

Is the Keystone XL Pipeline the “Stonewall” of the Climate Movement? And If So, Is That Terrible News? By Bill McKibben

A few weeks ago, Time magazine called the fight over the Keystone XL pipeline that will bring some of the dirtiest energy on the planet from Alberta, Canada, to the U.S. Gulf Coast the “Selma and Stonewall” of the climate movement.

Which, if you think about it, may be both good news and bad news. Yes, those of us fighting the pipeline have mobilized record numbers of activists: the largest civil disobedience action in 30 years and 40,000 people on the mall in February for the biggest climate rally in American history. Right now, we’re aiming to get a million people to send in public comments about the “environmental review” the State Department is conducting on the feasibility and advisability of building the pipeline. And there’s good reason to put pressure on. After all, it’s the same State Department that, as on a previous round of reviews, hired “experts” who had once worked as consultants for TransCanada, the pipeline’s builder.

Still, let’s put things in perspective: Stonewall took place in 1969, and as of last week the Supreme Court was still trying to decide if gay people should be allowed to marry each other. If the climate movement takes that long, we’ll be rallying in scuba masks. (I’m not kidding. The section of the Washington Mall where we rallied against the pipeline this winter already has a big construction project underway: a flood barrier to keep the rising Potomac River out of downtown DC.)

It was certainly joyful to see marriage equality being considered by our top judicial body. In some ways, however, the most depressing spectacle of the week was watching Democratic leaders decide that, in 2013, it was finally safe to proclaim gay people actual human beings. In one weekend, Democratic senators Mark Warner of Virginia, Claire McCaskill of Missouri, Tim Johnson of South Dakota, and Jay Rockefeller of West Virginia figured out that they had “evolved” on the issue. And Bill Clinton, the greatest weathervane who ever lived, finally decided that the Defense of Marriage Act he had signed into law, boasted about in ads on Christian radio, and urged candidate John Kerry to defend as constitutional in 2004, was, you know, wrong. He, too, had “evolved,” once the polls made it clear that such an evolution was a safe bet.

Why recite all this history? Because for me, the hardest part of the Keystone pipeline fight has been figuring out what in the world to do about the Democrats.

Fiddling While the Planet Burns

Let’s begin by stipulating that, taken as a whole, they’re better than the Republicans. About a year ago, in his initial campaign ad of the general election, Mitt Romney declared that his first act in office would be to approve Keystone and that, if necessary, he would “build it myself.” (A charming image, it must be said). Every Republican in the Senate voted on a nonbinding resolution to approve the pipeline -- every single one. In other words, their unity in subservience to the fossil fuel industry is complete, and almost compelling. At the least, you know exactly what you’re getting from them.

With the Democrats, not so much. Seventeen of their Senate caucus -- about a third -- joined the GOP in voting to approve Keystone XL. As the Washington insider website Politico proclaimed in a headline the next day, “Obama’s Achilles Heel on Climate: Senate Democrats.”

Which actually may have been generous to the president. It’s not at all clear that he wants to stop the Keystone pipeline (though he has the power to do so himself, no matter what the Senate may want), or for that matter do anything else very difficult when it comes to climate change. His new secretary of state, John Kerry, issued a preliminary environmental impact statement on the pipeline so fraught with errors that it took scientists and policy wonks about 20 minutes to shred its math.

Administration insiders keep insisting, ominously enough, that the president doesn’t think Keystone is a very big deal. Indeed, despite his amped-up post-election rhetoric on climate change, he continues to insist on an “all-of-the-above” energy policy which, as renowned climate scientist James Hansen pointed out in his valedictory shortly before retiring from NASA last week, simply can’t be squared with basic climate-change math.

All these men and women have excuses for their climate conservatism. To name just two: the oil industry has endless resources and they’re scared about reelection losses. Such excuses are perfectly realistic and pragmatic, as far as they go: if you can’t get re-elected, you can’t do even marginal good and you certainly can’t block right-wing craziness. But they also hide a deep affection for oil industry money, which turns out to be an even better predictor of voting records than party affiliation.

Anyway, aren’t all those apologias wearing thin as Arctic sea ice melts with startling, planet-changing speed? It was bad enough to take four decades simply to warm up to the idea of gay rights. Innumerable lives were blighted in those in-between years, and given long-lasting official unconcern about AIDS, innumerable lives were lost. At least, however, inaction didn’t make the problem harder to solve: if the Supreme Court decides gay people should be able to marry, then they’ll be able to marry.

Unlike gay rights or similar issues of basic human justice and fairness, climate change comes with a time limit. Go past a certain point, and we may no longer be able to affect the outcome in ways that will prevent long-term global catastrophe. We’re clearly nearing that limit and so the essential cowardice of too many Democrats is becoming an ever more fundamental problem that needs to be faced. We lack the decades needed for their positions to “evolve” along with the polling numbers. What we need, desperately, is for them to pitch in and help lead the transition in public opinion and public policy.

Instead, at best they insist on fiddling around the edges, while the planet prepares to burn. The newly formed Organizing for Action, for instance -- an effort to turn Barack Obama’s fundraising list into a kind of quasi-official MoveOn.org -- has taken up climate change as one of its goals. Instead of joining with the actual movement around the Keystone pipeline or turning to other central organizing issues, however, it evidently plans to devote more energy to house parties to put solar panels on people’s roofs. That’s great, but there’s no way such a “movement” will profoundly alter the trajectory of climate math, a task that instead requires deep structural reform of exactly the kind that makes the administration and Congressional “moderates” nervous.

Energy Independence: Last Century’s Worry

So far, the Democrats are showing some willingness to face the issues that matter only when it comes to coal. After a decade of concentrated assault by activists led by the Sierra Club, the coal industry is now badly weakened: plans for more than 100 new coal-fired power plants have disappeared from anyone’s drawing board. So, post-election, the White House finally seems willing to take on the industry at least in modest ways, including possibly with new Environmental Protection Agency regulations that could start closing down existing coal-fired plants (though even that approach now seems delayed).

Recently, I had a long talk with an administration insider who kept telling me that, for the next decade, we should focus all our energies on “killing coal.” Why? Because it was politically feasible.

And indeed we should, but climate-change science makes it clear that we need to put the same sort of thought and creative energy into killing oil and natural gas, too. I mean, the Arctic -- from Greenland to its seas -- essentially melted last summer in a way never before seen. The frozen Arctic is like a large physical feature. It’s as if you woke up one morning and your left arm was missing. You’d panic.

There is, however, no panic in Washington. Instead, the administration and Democratic moderates are reveling in new oil finds in North Dakota and in the shale gas now flowing out of Appalachia, even though exploiting both of these energy supplies is likely to lock us into more decades of fossil fuel use. They’re pleased as punch that we’re getting nearer to “energy independence.” Unfortunately, energy independence was last century’s worry. It dates back to the crises set off by the Organization of the Petroleum Exporting Countries in the early 1970s, not long after… Stonewall.

So what to do? The narrow window of opportunity that physics provides us makes me doubt that a third party will offer a fast enough answer to come to terms with our changing planet. The Green Party certainly offered the soundest platform in our last elections, and in Germany and Australia the Greens have been decisive in nudging coalition governments towards carbon commitments. But those are parliamentary systems. Here, so far, national third parties have been more likely to serve as spoilers than as wedges (though it’s been an enlightening pleasure to engage with New York’s Working Families Party, or the Progressives in Vermont). It’s not clear to me how that will effectively lead to changes during the few years we’ve got left to deal with carbon. Climate science enforces a certain brute realism. It makes it harder to follow one’s heart.

Along with some way to make a third party truly viable, we need a genuine movement for fundamental governmental reform -- not just a change in the Senate’s filibuster rules, but publicly funded elections, an end to the idea that corporations are citizens, and genuine constraints on revolving-door lobbyists. These are crucial matters, and it is wonderful to see broad new campaigns underway around them. It’s entirely possible that there’s no way to do what needs doing about climate change in this country without them. But even their most optimistic proponents talk in terms of several election cycles, when the scientists tell us that we have no hope of holding the rise in the planetary temperature below two degrees unless global emissions peak by 2015.

Of course, climate-change activists can and should continue to work to make the Democrats better. At the moment, for instance, the 350.org action fund is organizing college students for the Massachusetts primary later this month. One senatorial candidate, Steven Lynch, voted to build the Keystone pipeline, and that’s not okay. Maybe electing his opponent, Ed Markey, will send at least a small signal. In fact, this strategy got considerably more promising in the last few days when California hedge fund manager and big-time Democratic donor Tom Steyer announced that he was not only going to go after Lynch, but any politician of any party who didn’t take climate change seriously. “The goal here is not to win. The goal here is to destroy these people,” he said, demonstrating precisely the level of rhetoric (and spending) that might actually start to shake things up.

It will take a while, though. According to press reports, Obama explained to the environmentalists at a fundraiser Steyer hosted that “the politics of this are tough,” because “if your house is still underwater,” then global warming is “probably not rising to your number one concern.”

By underwater, he meant: worth less than the mortgage. At this rate, however, it won’t be long before presidents who use that phrase actually mean “underwater.” Obama closed his remarks by saying something that perfectly summed up the problem of our moment. Dealing with climate change, he said, is “going to take people in Washington who are willing to speak truth to power, are willing to take some risks politically, are willing to get a little bit out ahead of the curve -- not two miles ahead of the curve, but just a little bit ahead of it.”

That pretty much defines the Democrats: just a little bit ahead, not as bad as Bush, doing what we can.

And so, as I turn this problem over and over in my head, I keep coming to the same conclusion: we probably need to think, most of the time, about how to change the country, not the Democrats. If we build a movement strong enough to transform the national mood, then perhaps the trembling leaders of the Democrats will eventually follow. I mean, “evolve.” At which point we’ll get an end to things like the Keystone pipeline, and maybe even a price on carbon. That seems to be the lesson of Stonewall and of Selma. The movement is what matters; the Democrats are, at best, the eventual vehicle for closing the deal.

The closest thing I’ve got to a guru on American politics is my senator, Bernie Sanders. He deals with the Democrat problem all the time. He’s an independent, but he caucuses with them, which means he’s locked in the same weird dance as the rest of us working for real change.

A few weeks ago, I gave the keynote address at a global warming summit he convened in Vermont’s state capital, and afterwards I confessed to him my perplexity. “I can’t think of anything we can do except keep trying to build a big movement,” I said. “A movement vast enough to scare or hearten the weak-kneed.”

“There’s nothing else that’s ever going to do it,” he replied.

And so, down to work.

 

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State Department Report: Keystone XL Is Environmentally Sound

The State Department released an environmental impact assessment on the Keystone XL pipeline Friday afternoon, concluding that the project is environmentally sound and “is unlikely to have a substantial impact on the rate of development in the oil sands, or on the amount of heavy crude oil refined in the Gulf Coast area.” A 45-day comment period will now begin for the public to weigh in on the project. The State Department will respond to the comments, before finalizing the environmental impact statement, and “conduct a separate analysis of whether the project is in the national interest, a question on which eight other agencies will offer input over 90 days.” Obama is unlikely to make a final decision until “mid-summer at the earliest.”

From the report:

Based on information and analysis about the North American crude transport infrastructure (particularly the proven ability of rail to transport substantial quantities of crude oil profitably under current market conditions, and to add capacity relatively rapidly) and the global crude oil market, the draft Supplemental EIS concludes that approval or denial of the proposed Project is unlikely to have a substantial impact on the rate of development in the oil sands, or on the amount of heavy crude oil refined in the Gulf Coast area. [...] Spills associated with the proposed Project that enter the environment are expected to be rare and relatively small.

The study found that “The annual CO2e emissions from the proposed Project is equivalent to CO2e emissions from approximately 626,000 passenger vehicles operating for one year or 398,000 homes using electricity for one year.” It also suggests that “America can meet its energy needs over the next decade without” the project by relying on the “growth in rail transport of oil from western Canada and the Bakken Formation on the Great Plains and other pipelines.”

The proposed pipeline would transport tar sands oil — one of the dirtiest and most carbon-intensive of the fossil fuels — all the way from Canada to the Gulf of Mexico. Industry officials have themselves admitted that without the pipeline, vast amounts of tar sands will stay in the ground. Were the project to go online, the pipeline would constitute a “carbon bomb,” further enabling the ongoing glut of carbon emissions into the atmosphere that threaten to drive global warming to catastrophic levels.

Because of its importance to the fossil fuel industry, contrasted with the damage it would add to the planet’s climate, the Keystone XL pipeline became a flashpoint in the national debate over future climate and energy policy. All told, over $178 million was spent 2012 to lobby in support of the pipeline — outdoing opponents by a whopping 35 to 1. Keystone pipeline boosters included business groups such as the U.S. Chamber of Commerce and the Business Roundtable, labor unions such the Laborers’ International Union of North America and the Building and Construction Trades Department of the AFL-CIO, and the usual Big Oil suspects such as Exxon Mobil, Chevron, and Shell Oil. 

Despite that overwhelming show of lobbying force, the Keystone XL pipeline galvanizedenvironmentalists, climate activists, and other opponents to shift the center of gravity in the debate. First, the Obama Administration delayed its decision on the pipeline, which was originally scheduled for January. Then Obama picked noted climate hawk Sen. John Kerry (D-MA) as the new Secretary of State, thus placing him in charge of State’s review of the project. Finally, ever since the election November 2012, both Kerry and Obama himself have surprised observers bytaking unusually strong stances on the need to address the threat of climate change immediately and decisively.

Sierra Club responds: “We’re mystified as to how the State Department can acknowledge the negative effects of the Earth’s dirtiest oil on our climate, but at the same time claim that the proposed pipeline will ‘not likely result in significant adverse environmental effects.’ Whether this failure was willful or accidental, this report is nothing short of malpractice. ”