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San Francisco Lawmaker Urges Libor Manipulation Inquiry

Jan. 29 (Bloomberg) -- San Francisco Supervisor John Avalos plans to request a hearing today to examine whether city investments were harmed by manipulation of a key lending rate, his aide said.

The lawmaker will ask the city’s financial team to examine the effect on its investments of efforts to rig the benchmark London interbank offered rate, or Libor, and whether any losses can be recovered, said the aide, Jeremy Pollock.

“We know the banks colluded to rig interest rates resulting in significant losses to taxpayers across the nation,” Avalos said in a statement. “We owe it to our city residents to find out how much this type of bank fraud cost San Francisco.”

Barclays Plc, Britain’s second-biggest lender, paid a record 290 million-pound ($470 million) fine in June for manipulating Libor, used to set rates for more than $300 trillion of securities. Some interest-rate derivatives known as swaps, used by municipalities to hedge against losses, were tied to Libor.

San Francisco’s general fund “has no swaps in its portfolio,” said Nadia Sesay, the city’s director of public finance.

Interest-rate swaps are derivative transactions in which two parties agree to trade interest payments on a set amount of debt, letting one of the parties create a fixed-rate payment on variable-rate debt.

Eight California counties and public entities sued Barclays, UBS AG and 20 other banks alleging they lost millions of dollars because the financial institutions manipulated Libor. The plaintiffs, which include San Diego and San Mateo counties, said they were cheated out of higher interest payments on investments such as swaps and corporate bonds tied to Libor.

Regulators investigating Libor manipulation have sought information from more than a dozen banks that set rates in the U.S., Europe and Japan.

-- With assistance from Karen Gullo in San Francisco. Editors: Pete Young, Ted Bunker

To contact the reporter on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net.

To contact the editor responsible for this story: Stephen Merelman in New York at smerelman@bloomberg.net.

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