Wed July 25, 2012
LIBOR Scandal Likely Affecting Revenues for Kentucky Agencies
A former trustee for the Kentucky Pension Systems says an international banking scandal is leading to millions of dollars in losses for Kentucky agencies.
Investment consultant Chris Tobe believes the pension systems have lost money due to the false interest rates associated with the LIBOR banking scandal.
LIBOR averages interest rates from other major banks to set a standard. Some banks are charged with providing manipulated rates to LIBOR to boost profiles.
Five state attorney generals are already investigating what effect the LIBOR banking scandal has had on their states.
Tobe says he sent a letter to Kentucky Attorney General Jack Conway this week, asking Conway to investigate and attempt to recoup losses for the state as well.
“Well the real objective is for the attorney general to recover money for Kentucky taxpayers and other attorney generals have gone after financial institutions,” Tobe says.
Other governmental agencies large enough to issue municipal bonds are at risk of losses too, Tobe says, which is why it’s important for Conway to act.
“Any type of entities in Kentucky that issue municipal bonds, a lot of them did buy these interest rate swaps based on LIBOR," says Tobe. "So other large cities all around the state and other kind? of quasi-entities like MSD are the type of people who issue bonds and who may have some of these types of swaps,” he says