Barclays Faces Lawsuits in the US

A federal class action lawsuit against Barclays and other banks is already working its way through the court system in the US.

The City of Baltimore is named, but other municipalities and corporations are awaiting the outcome.

Lawyer Hilary Scherrer, based in DC, says that overall, the potential losses could run into billions.

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Aaron Schachter: It should be said that Barclays Bank is willing cooperating with those investigating the scandal. The bank is trying to ward off the prosecution. The names of other banks also thought to be involved haven’t been made public in Britain. The effects of this scandal are already being felt here in the US. The City of Baltimore is among those joining a class-action lawsuit against Barclays for potential losses. Hilary Scherrer is a Washington DC based lawyer involved in the suit. She says the market for the financial products affected by this banking scandal is huge and so are the potential losses.

Hilary Scherrer: The market has been reported to be in the trillions of dollars. We’ve seen anywhere from four hundred to four hundred and fifty trillion dollars and those are financial instruments that are indexed to Libor, which is this interest rate that many banks often use.

Schachter: Where does this fall for your clients? Billions of dollars too?

Scherrer: Potentially for our clients we are looking at millions and billions of dollars of losses. We haven’t done those calculations yet and we’re looking at this on a class-wide basis as well. So when you’ve got a market that’s made up of trillions of dollars, even minute manipulations of that market can have billions of dollars of impact.

Schachter: Now, I realize this is a big complicated issue, but if we could, in simple terms, how did your clients say they lost money?

Scherrer: The City of Baltimore and others that are represented in the suit entered into financial transactions to manage their interest rate risk – their exposure when interest rates either rose or fall. The defendant banks were manipulating downward which resulted in more cash staying in their coffers and not ending up in the coffers of cities, municipalities, and corporate entities.

Schachter: Is this kind of an investment insurance?

Scherrer: Yeah, I think you can call it insurance. It’s to manage that risk of interest rates changing dramatically.

Schachter: So, in essence, the insurance company was mucking about with the rates?

Scherrer: I think that’s a fair way of saying it, yes.

Schachter: Is there any way to know exactly who was hurt when and how?

Scherrer: We have a complaint that has a fair amount of economic analysis, and based on our analysis it appears that it was manipulated down. Our clients are those that would have been hurt by downward manipulations in those interest rates.

Schachter: This scandal has led to senior resignations at Barclays, but I wonder if you think this is just the start of yet another banking crisis and that more companies will be found to have been involved.

Scherrer: Well, my understanding is that there are certainly ongoing investigations in the United States as well as by other authorities around the world. So there, I think, will be more news to come on this. Whether that rises to the level of a banking crisis, I’m not sure, but I certainly do think that this is a wide ranging rate-fixing scandal.

Schachter: It seems like this is a big, big deal.

Scherrer: Yeah, and I think this probably is just the tip of the iceberg because our complaint is one that’s filed in the United States. We are looking at cases and working with law firms around the world, so I think this is just the beginning of the litigation.

Schachter: And I trust legislation in the US makes any compensation claim quite astronomical compared to the United Kingdom. As you say, the potential payout here could be billions, but I imagine the lawsuit would drag on for quite a while.

Scherrer: When we have entities that are making admissions to government regulators that certainly helps our cases. These types of litigations do notoriously go on for a long time, but we’re hopeful that this is a strong case and it will move quickly through the court system.

Schachter: Hilary Scherrer is one of the lawyers involved in a class-action lawsuit against Barclays and other banks on behalf of cities, corporations, and other clients here in the US.

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