Will Credit Unions Recover for LIBOR Fraud

July 30, 2012 at 7:24 am 1 comment

The potentially huge implications of the LIBOR manipulation scandal grew into sharper focus late last week when Berkshire Bank commenced a class action lawsuit in federal district court in New York City seeking to represent all banks and credit unions headquartered in New York that were victimized by the allegedly fraudulent activity of the banking institutions involved.  The complaint, a copy of which can be read in today’s Wall Street Journal, seeks damages resulting from LIBOR manipulation between 2007 and 2010. 

The crux of the plaintiff’s argument is that lenders such as credit unions, which used LIBOR to set adjustable interest rates on mortgages, detrimentally relied “upon defendant’s misrepresentations by calculating the interest due from borrowers based upon the fraudulently depressed” LIBOR rates.  As we can see from the difficulties that merchants are having rounding up support for their class action credit card settlement, being a member of a putative class is just the very first step in what promises to be a very lengthy legal journey.  Still, when one looks at the enormity of numbers we’re talking about when it comes to alleged LIBOR manipulation, I don’t think analogies between this scandal and asbestos and tobacco litigation are unfounded.

This is going to be an interesting one to keep an eye on.

A silly game of TAG

Reuters has an article this morning providing an update on banker attempts to win an extension of the Transaction Account Guarantee (TAG) program, which allows the FDIC to ensure deposits beyond $250,000.  It appears that the Government guarantee has been such a windfall for community banks that some larger banks were reluctant to push for an extension of the program.  Could it be that not all banking institutions support an extension of TAG, thereby showing that their entire lobbying effort is just a cynical sham? 

No, that’s a silly argument; no industry is going to have complete uniformity on any issue.  It is sad to see, though, how dependent the community banks are on an implicit government guarantee while they unabashedly suggest that the tax status of credit unions should keep them from providing member business loans to the private sector.

Entry filed under: Advocacy, Legal Watch, New York State. Tags: , , , .

NCUA Lives to Fight Another Day Three Strikes, the Economy is Out

1 Comment Add your own

  • 1. Unicorn  |  December 30, 2012 at 11:11 am

    Do I need to be a resident of NY to join the Class Action Lawsuit ?

    Reply

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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