INTEREST RATE SWAPS EXPLAINED: AN INSURANCE CONTRACT ON FLOATING RATE BONDS THAT HAS A CLAUSE LEAVING THE SWAP PURCHASER (MOST COMMONLY MUNICIPALITIES) "SHOVELING OUT MILLIONS OF DOLLARS ON A DECLINE OF LIBOR," WHEREAS THE ISSUING BANK HAS TAKEN ITS PROFIT ON DAY ONE AND THEREFORE CANNOT LOSE. HOWEVER, THE BANK CAN WIN IN OTHER WAYS BY DRIVING LIBOR DOWNWARD ...INCIDENTALLY MAKING ITS INTEREST-RATE-SWAP CLIENTS COLATERAL DAMAGE.

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Interest Rate-Fixing Scandal Swindles Baltimore, Other Municipalities out of Millions of Dollars 

Amidst the financial crisis of 2008 and resultant recession, cities and states around the country lost millions of dollars on investments tied to the London Interbank Offered Rate (Libor). Far from a "free market phenomenon," they say the rate was suppressed by a cartel of some of the world's largest banks, and the city of Baltimore is taking them to court.

Related Story: Baltimore, Big Banks and a Criminal Conspiracy 
Watch full multipart The LIBOR Fraud

Bio 

Thomas Ferguson is Professor of Political Science at the University of Massachusetts, Boston and a Senior Fellow of the Roosevelt Institute. He received his Ph.D. from Princeton University and taught formerly at MIT and the University of Texas, Austin. He is the author or coauthor of several books, including Golden Rule (University of Chicago Press, 1995) and Right Turn (Hill & Wang, 1986). Most of his research focuses on how economics and politics affect institutions and vice versa. His articles have appeared in many scholarly journals, including the Quarterly Journal of Economics, International Organization, International Studies Quarterly, and the Journal of Economic History. He is a long time Contributing Editor to The Nation and a member of the editorial boards of the Journal of the Historical Society and the International Journal of Political Economy.

ECONOMIST AND WHITE-COLLAR CRIMINOLOGIST BILL BLACK: THE NEW YORK FED UNDER TIM GEITHNER "WAS INFORMED BY BARKLEYS TRADERS THAT THE RATE WAS BEING MANIPULATED DOWN ... BUT THEY DON'T APPEAR TO HAVE MADE CRIMINAL REFERALS." "SO IF THE NEW YORK FED SCREWED UP OUR ABILITY TO PROSECUTE BY NOT TAKING ACTION AGAINST BARKLEYS, THAT'S NOT A CRIME BY GEITHNER BUT IT'S CERTAINLY SOMETHING WHERE HE SHOULD RESIGN IMMEDIATELY ... HE WAS AN ABJECT FAILURE AS A REGULATOR."

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Baltimore, Big Banks and a Criminal Conspiracy 

Bill Black: The LIBOR fraud stole millions upon millions from American cities and people around the world

Original with full transcript here.

Bio 

William K. Black, author of THE BEST WAY TO ROB A BANK IS TO OWN ONE, teaches economics and law at the University of Missouri - Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics. Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement. Black developed the concept of "control fraud" - frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.