The banks have systematically figured out how to rip off the government,” Lerner says.
Part of that ripoff was the LIBOR scandal, which had a “massive consequence on everything,” according to Wallace Turbeville, a former Goldman Sachs employee and current senior fellow at nonpartisan think tank Demos.
The conspiracy among banks like Barclay's, J.P. Morgan, and Bank of America to manipulate the London Interbank Offered Rate (LIBOR)—a key rate that is used to determine other interest rates, like mortgages and securities, including contracts by some 75 percent of major municipalities—raised the costs of raising capital for things like building bridges and schools. “The drain goes directly from, in this case, governments into the pockets of the big banks, which are the only ones that can really manipulate LIBOR to their advantage,” Turbeville explains. “That's a big problem, and there's no solution that people have come up with yet.”
Local 503's research team has calculated Oregon's hit as just over $110 million in direct LIBOR losses from various state funds, and estimates that because the statute of limitations prevents the recovery of money lost on violations dating back more than five years, the state could be losing $4 million a month for each month it doesn't act.1 Yet it's been hard for state and municipal governments to sue banks over LIBOR rigging because, Turbeville says, the legal system has a hard time with the idea that the banks screwed up the system itself rather than stole money from an individual entity.