Oregon unions call for LIBOR lawsuits, but no action yet
By DON McINTOSH
Associate Editor
Eight weeks ago, a group of union
leaders called on the State of Oregon to
file suit against a group of banks in
what’s known as the LIBOR scandal.
There’s no sign the call is being heeded.
Oregon Gov. John Kitzhaber — and
state legislators — have been pushing
all year to trim public employee pen-
sion benefits in a variety of ways. Yet
the pension system’s underfunding
stems from financial asset losses, public
employee union leaders point out. One
component of those losses is the LI-
BOR scandal, which is so complicated
and underreported that most Americans
still don’t know about it a year after it
broke.
LIBOR, pronounced “lie-bore,”
stands for London Interbank Offered
Rate. It was created in 1986 by the
British Bankers Association as a bench-
mark of interest rates. The way it works,
every business day a panel of 16 big
banks self-report at what interest rate
they could borrow funds, in different
currencies and loan durations. The high-
est and lowest rates are tossed, and the
rest are averaged to produce the LIBOR.
LIBOR is a hugely important indi-
cator. It is used to set the interest rates
on credit cards, student loans, and ad-
justable-rate mortgages. It’s also a ref-
erence point incorporated in a whole set
of exotic financial instruments, includ-
SEIU Local 503 leader Heather Conroy speaks at a May 3 press conference
outside the downtown Portland Bank of America tower, where she criticized
the state government for inaction nearly a year after the complicated LIBOR
banking scandal broke. SEIU was joined by every other major public
employee union at the event. Standing behind Conroy is Angela Martin of
the group Economic Fairness Oregon.
ing futures, options, forward rate agree-
ments, interest rate swaps, floating rate
notes, and syndicated loans.
But LIBOR’s small panel size (just
16 banks) — and the voluntary, unreg-
ulated nature of the reporting — left it
open to mischief. Banks found that they
could manipulate the LIBOR rate, ei-
UNION YES —
The latest report from the federal Bureau of Labor Statistics shows growth
in union workers’ average hourly pay and total benefits far outpaced that of
nonunion workers in the 12 months that ended in March.
The analysis, released June 12, says wages and salaries of union-repre-
sented workers grew 4.3 percent in the first quarter of 2013 to $24.17 per hour
from $23.17 in the same three-month span the prior year, while those of non-
union employees rose 0.8 percent to $20.11 from $19.96.
Total compensation increased 5.3 percent among union workers over the 12
months that ended in March, while growing only 0.8 percent for nonunion
workers.
JUNE 21, 2013
ther by falsely reporting what interest
rate they would pay, or by colluding
with other banks to do the same. A
2008 Wall Street Journal article raised
suspicions that was happening, but it
wasn’t until June 2012 that the public
knew for sure. That’s when Barclay’s
bank agreed to pay $453 million to
U.S. and U.K. regulators. Since then,
two other banks have settled: UBS
agreed in December 2012 to pay $1.5
billion to regulators, and the Royal
Bank of Scotland agreed in February
2013 to pay $612 million. In some
cases, derivatives traders working at
NORTHWEST LABOR PRESS
bank trading desks had pushed other
bank employees who reported the LI-
BOR quotes to provide high or low es-
timates depending on which would pro-
duce higher profits. In other cases,
banks reported a lower interest rate than
the true one in order to conceal troubled
financial positions. With trillions of dol-
lars of assets pegged to the LIBOR, the
consequences for owners of those as-
sets were huge.
So far, the City of Baltimore, several
California counties, and several pen-
sion funds and investor groups have
filed lawsuits against the banks on the
LIBOR panel, alleging that they lost in-
come or asset value as a result of the LI-
BOR manipulation. But not Oregon.
Leaders of Service Employees In-
ternational Union (SEIU) Local 503,
the Oregon AFL-CIO, Oregon AF-
SCME, American Federation of Teach-
ers, Oregon School Employees Union,
Oregon Education Association, and the
Oregon Working Families Party met
outside the downtown Portland Bank of
America tower May 3 to call on Ore-
gon’s governor, attorney general, and
state treasurer — all Democrats — to
sue the banks involved in the scandal.
According to estimates produced by
researchers at SEIU, funds overseen by
the State of Oregon lost $110 million
from September 2007 to March 2010
because of the LIBOR interest rate ma-
nipulation. The biggest losses would
have been to the Public Employment
Retirement Fund (PERS).
Asked by the Labor Press for a re-
sponse, Gov. Kitzhaber’s office and
Treasurer Ted Wheeler’s office referred
questions to Oregon Attorney General
Ellen Rosenblum. A spokesperson for
Rosenblum said Oregon is taking part
in a “multi-state investigation” into LI-
BOR manipulation, but he offered no
details as to who is conducting the in-
vestigation or what it entails.
The New York Times reported last
year that North Carolina, Connecticut,
Maryland, Massachusetts, and New
York were investigating grounds for a
suit, though none have yet been filed.
“We are continuing to encourage
the attorney general and the treasurer
to litigate on this,” said SEIU Local
503 President Heather Conroy. “They
have said they are continuing to look
for a viable path.”
Conroy says SEIU won’t relent. Her
union, which represents 50,000 state
employees, has continued to collect en-
dorsements from other organizations
for the campaign to get Oregon to target
LIBOR banks. It’s also collecting sig-
natures in an online petition at
http://bit.ly/198Wyqq. And in several
sets of union contract talks with the
state, Local 503 has formally proposed
that the state investigate and file suit
against the banks for its LIBOR losses.
“We hear back from state negotia-
tors that they’re struggling to under-
stand how this is appropriately a topic
for bargaining,” Conroy said, “to which
we say, ‘these are serious financial im-
pacts, and we’re talking [in bargaining]
about finances.’”
SEIU’s estimate of $110 million in
losses is based on a report by State Street
Bank at the request of the Oregon trea-
surer’s office. It relies on a hypothetical
model to determine losses based on the
amount and kind of assets held by the
state and the alleged degree to which the
LIBOR rate was manipulated.
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