© Reuters. An indication for the Royal Bank of Canada in Toronto, Ontario, Canada December 13, 2021. REUTERS/Carlos Osorio
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By Jonathan Stempel
NEW YORK (Reuters) – A U.S. federal choose on Thursday stated American cities might pursue class-action claims accusing eight giant banks of driving up rates of interest they paid on a well-liked municipal bond.
U.S. District Judge Jesse Furman in Manhattan rejected efforts by Bank of America, Barclays, Citigroup (NYSE:), Goldman Sachs, JPMorgan Chase (NYSE:), Morgan Stanley, Royal Bank of Canada and Wells Fargo to require cities to pursue claims individually, probably decreasing potential recoveries.
Cities led by Baltimore, Philadelphia and San Diego accused the banks of colluding to boost charges on greater than 12,000 variable-rate demand obligations (VRDOs) from 2008 to 2016.
They stated this lowered accessible funding for hospitals, energy and water provides, colleges and transportation, and sure brought on billions of {dollars} in damages.
Once a greater than $400 billion market, VRDOs are long-term bonds with short-term charges that usually reset weekly. Banks must remarket VRDOs that traders redeem on the lowest attainable charges.
Cities accused the eight banks of conspiring to not compete for remarketing companies, and artificially inflating charges by sharing details about bond inventories and deliberate charge modifications.
In opposing class certification, the banks stated variations among the many bonds would require many hundreds of individualized examinations into whether or not charge inflation occurred, making a single class-action lawsuit unwieldy.
But in a 33-page resolution, Furman stated two monetary markets specialists who the cities employed as knowledgeable witnesses established that the alleged collusion may have a class-wide influence.
“Of course, it remains an open question whether, assuming plaintiffs paid supra-competitive interest, that payment was caused by defendants’ allegedly anti-competitive behavior,” Furman wrote. “Whatever the answer to this question may be, however, it is a common question.”
Barclays, Citigroup and JPMorgan declined to remark. The different banks and their attorneys didn’t instantly reply to requests for remark.
Dan Brockett, a lawyer for the cities, stated they had been gratified by the choice.
The VRDOs market shrank to $72 billion by the tip of 2022, in line with the Municipal Securities Rulemaking Board.
The case is Philadelphia et al v Bank of America Corp (NYSE:) et al, U.S. District Court, Southern District of New York, No. 19-01608.
