By Pam Martens: July 9, 2012

The Mayor of Baltimore, the Baltimore City Council, the City of New Britain Firefighters’ and Police Benefit Fund of Connecticut filed an amended lawsuit on April 30 of this year seeking class action status in Federal Court in New York over the rigging of Libor.  The plaintiffs state that the City of Baltimore purchased hundreds of millions of dollars of derivatives tied to Libor while the New Britain Firefighters and Police Benefit Fund purchased tens of millions.  They are suing the banks involved in submitting Libor rates. 

The plaintiffs have submitted to the Court significant background data suggesting that anomalies in other financial measurements show which banks were brazenly lying when submitting their borrowing rates for setting Libor. 

One chart stands out in particular.  The following shows the 12-month U.S. Dollar Libor quotes from Citigroup and the Bank of Tokyo, together with the respective bank’s one-year senior Credit Default Swap (CDS) spread. Citigroup had a significantly higher CDS spread than the Bank of Tokyo, yet it was submitting a lower Libor quote.