Tag Archives: Deutsche Bank

Fire Sale Begins: Chinese Conglomerate HNA Starts Liquidating Billions In US Real Estate


Yesterday ZeroHedge
explained that one of the reasons why Deutsche Bank stock had tumbled to the lowest level since 2016, is because its top shareholder, China’s largest and most distressed conglomerate, HNA Group, had reportedly defaulted on a wealth management product sold on Phoenix Finance according to the local press reports. While HNA’s critical liquidity troubles have been duly noted here and have been widely known, the fact that the company was on the verge (or beyond) of default, and would be forced to liquidate its assets imminently, is what sparked the selling cascade in Deutsche Bank shares, as investors scrambled to frontrun the selling of the German lender which is one of HNA’s biggest investments.

Now, one day later, we find that while Deutsche Bank may be spared for now – if not for long – billions in US real estate will not be, and in a scene right out of the Wall Street movie Margin Call, HNA has decided to be if not smartest, nor cheat, it will be the first, and has begun its firesale of US properties.

According to Bloomberg, HNA is marketing commercial properties in New York, Chicago, San Francisco and Minneapolis valued at a total of $4 billion as the indebted Chinese conglomerate seeks to stave off a liquidity crunch. The marketing document lists six office properties that are 94.1% leased, and one New York hotel, the 165-room Cassa, with a total value of $4 billion.

One of the flagship properties on the block is the landmark office building at 245 Park Ave., according to a marketing document seen by Bloomberg.

https://www.zerohedge.com/sites/default/files/inline-images/245%20park.jpg?itok=o04ldvfo245 Park Avenue, New York

HNA bought that skyscraper less than a year ago for $2.21 billion, one of the highest prices ever paid for a New York office building. The company also is looking to sell 850 Third Ave. in Manhattan and 123 Mission St. in San Francisco, according to the document. The properties are being marketed by an affiliate of brokerage HFF.

This is just the beginning as HNA’s massive debt load – which if recent Chinese reports are accurate the company has started defaulting on – is driving the company to sell assets worldwide.

According to Real Capital Analytics estimates, HNA owns more than $14 billion in real estate properties globally. The problem is that the company has a lot more more debt. As of the end of June, HNA had 185.2 billion yuan ($29.3 billion) of short-term debt — more than its cash and earnings can cover. The company’s total debt is nearly 600 billion yuan or just under US$100 billion. Which means that the HNA fire sale is just beginning, and once the company sells the liquid real estate, it will move on to everything else, including its stake in all these companies, whose shares it has already pledged as collateral.

https://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/12/23/HNA%20reverse%20rollup.png

So keep a close eye on Deutsche Bank stock: while HNA may have promised John Cryan it won’t sell any time soon but companies tend to quickly change their mind when bankruptcy court beckons.

Finally, the far bigger question is whether the launch of HNA’s firesale will present a tipping point in the US commercial (or residential) real estate market. After all, when what until recently was one of the biggest marginal buyers becomes a seller, it’s usually time to get out and wait for the bottom.

Source: ZeroHedge

 

Advertisements

Deutsche Bank Is Blood In The Water… And Sharks Smell It.

Is This Crisis Like Lehman Brothers on Steroids?

https://i0.wp.com/dweaay7e22a7h.cloudfront.net/dr-content_3/uploads/2016/09/deutsche-bank--650x360.jpg

Deutsche Bank is blood in the water… and the sharks smell it.

Yesterday, Bloomberg reported that major hedge funds were reducing their exposure to the German banking behemoth. The smart money is headed for the exits.

That caused the bank’s U.S.-listed shares to hit a new all-time low of $11.27 yesterday. The stock closed down nearly 7% for the day.

And that’s just the most recent bad news for Deutsche…

Earlier this week, Chancellor Angela Merkel said that Germany wasn’t going to bail it out.

That’s on top of $14 billion fine recently imposed by the U.S. Justice Department that the bank can’t afford to pay. Its current market capitalization is just $16.8 billion.

This torrent of negativity has the talking heads warning that Deutsche Bank is careening toward bankruptcy, bringing back memories of Lehman Bros. in 2008.

But it’s more than that…

Leveraged to the Hilt:

What investors are finally realizing is that Deutsche Bank is insolvent, something I told my Trend Following subscribers back in July.

Deutsche has astounding leverage of 40 times. Leverage is the proportion of debts that a bank has compared with its equity/capital. That means Deutsche has 40 times more debt than equity/ capital.

Remember, Lehman Bros. was only 31 times leveraged when it imploded in 2008.

The huge concern for investors right now is whether the bank can make enough profit to start overcoming its liabilities.

But it’s trapped in a low-growth economic environment. And it’s being choked to death by the European Central Bank’s negative interest rate policy (NIRP).

Because of NIRP, EU banks like Deutsche Bank effectively have to pay the central bank to hold cash on their balance sheets. At the same time, they can’t charge high rates on the loans they make. As a result, they’re getting squeezed on net interest margins, which decimates profits.

Plus, Deutsche has more than $72 trillion of risky derivatives exposure. Derivatives are the complex financial instruments that cratered the global economy in 2008.

By Michael Covel | Daily Reckoning

This Will Devolve Into A No Brexit, Brexit

https://westernrifleshooters.files.wordpress.com/2016/06/eublackhole.jpg?w=750&h=765

Summary

  • The UK voters have been conned, the costs of Brexit are prohibitive.
  • They will either have to vote again (either in a new referendum or a general election) or there will be a ‘Brexit light’.
  • The latter option will make a mockery of the promises to Brexit voters, but it will limit the economic dangers.
  • Still, the saga has increased the risks in the world economy, especially in the EU.

We sold everything on the Friday after Brexit, as we saw little upside, and many festering risks in the world economy. Risks which Brexit would clearly increase, most notably the risks of an economic slowdown in the EU, causing further political turmoil.

But these are by no means the only pressure points in the world economy, as we described in the previous article.

But markets rallied back (we didn’t expect an immediate crash as a result of Brexit), and it slowly dawned upon us that the most logical explanation is that there will be no Brexit.

Why? In essence, it’s fairly simple. The price of the promises made by the Brexit camp, most notably to control immigration, to pay much less to Brussels and to ‘take back control’ cannot really be achieved at anywhere near acceptable cost.

Let’s start with immigration. The UK wasn’t part of Schengen (which abolished internal border controls), but it was bound by the four freedoms of the internal market, most notably the freedom for EU citizens to live anywhere in the EU.

In order to escape that (the UK is a popular destination for East Europeans, most notably Polish) the UK would really have to get out of the single market. But this opens up a Pandora’s box of problems.

First, since the EU is the UK’s most important market, it would have to negotiate access to the single market, and do that within the two years given by Article 50 (the EU has made it clear no negotiations will start before Article 50 is triggered).

Not only that, it would have to deal with negotiating multiple other trade deals, perhaps as many as 50, basically with much of the rest of the world.

 

The UK isn’t equipped to do that (trade has been an EU prerogative), let alone in any amount of acceptable time. The resulting uncertainty isn’t exactly good for business. This will affect inward investment, location decisions, job creation, etc.

That alone is already too high a price to pay. But there are other implications, like (Bloomberg):

Britain has voted to exit the EU and Xi’s being forced to reassess his strategy for the 28-member bloc, China’s second-biggest trading partner, according to data compiled by Bloomberg. The U.K. has been a key advocate for China in Europe, from building trade-and-financial links to supporting initiatives such as the Asian Infrastructure Investment Bank. Beijing’s leaders were counting on the U.K’s backing later this year when the bloc decides whether to grant China market-economy status. “One major reason why China attaches great importance to its relations with the U.K. is to leverage EU policy via the U.K.,” said Xie Tao, a professor of political science at Beijing Foreign Studies University. London’s value as a “bridgehead” to Europe has been lost with Brexit, Xie said, leaving China to turn its focus to Germany.

Perhaps even more important is London’s status as a financial center. From Business Insider:

First, international banks are likely to move staff out of London and do less business in the UK. Long before the vote, rival financial centers like Paris began campaigns to woo those bankers. JPMorgan chief Jamie Dimon told an audience of bank employees in Bournemouth, one of many regional financial centers in the UK, that as many as 4,000 jobs may be affected by a Brexit before the vote… It isn’t just a question of whether staff move from London to another financial center, either. New jobs are less likely to be created in London. M&G Investments, the fund arm of insurer Prudential, is looking at expanding its operations in Dublin, according to Reuters. The proposed merger between the London Stock Exchange and Deutsche Borse, which would have seen the combined group based in London, now looks to be on shaky ground. Germany’s financial regulator has also said that London will no longer be the center of euro-denominated trading.

There are myriad other costs and awkward consequences, but this suffices to highlight the fact that it’s not a good idea to actually leave.

Ergo, powers will awake to prevent this and keep the UK in the single market. We can’t see the UK’s economic, financial and political elite shoot themselves in the foot without regrouping and giving this a mighty fight.

It’s fortunate that there is a cooling off period, in which calmer heads can prevail. First the governing Conservative Party has to choose a new leader.

Then they will have to work out a plan and trigger (or not) Article 50, the formal request to leave the EU.

Two outcomes seem likely, either things stay as they are, or the UK opts for membership of the EEA, which guarantees access to the single market. Perhaps they manage some symbolic concessions.

Both of these options amount to betraying the Brexit voters, one could even say they have been conned. It’s obvious if the referendum is simply ignored by Parliament, after all there already is a Parliamentary majority of 350 for remaining in the EU.

But EEA membership, like Norway, would also betray the Brexit voters and we doubt it’s any more attractive than simply remain in the EU. The UK would continue to have access to the single market, but not be a part of setting its rules.

The UK would continue to be bound by the freedom for people to live and work anywhere within the EU, making a mockery of the promise to control immigration.

Even the budgetary consequences aren’t really that much better (Yahoo):

But the fees in Norway, the nearest analog to the UK, are almost as high as what the UK pays to the EU now, and Norway has no say at all in EU decisions.

So either there will be no Brexit (a new referendum or new elections, with the winning side clearly having a mandate for remaining in the EU will be necessary), or it will be a Brexit light (EEA membership), making a mockery of the promises to the Brexit voters.

The economic consequences of the latter are much less damaging, so did we sell in vain? Not necessarily. The whole Brexit saga is still increasing the risks in the world economy, of which there are many, especially in the eurozone.

Stocks are still expensive (especially on a GAAP basis), we see limited upside, and might very well go short when stocks start approaching their all-time highs again. It’s more of a trader’s market, in our opinion.

by Shareholders Unite | Seeking Alpha

IMF Says “Deutsche Bank Poses The Greatest Risk To The Global Financial System”

https://s14-eu5.ixquick.com/cgi-bin/serveimage?url=http%3A%2F%2Fcdn.cfo.com%2Fcontent%2Fuploads%2F2015%2F04%2FDeutsche_Bank.jpg&sp=36601abcbe863655197db0af9e7a792a

Over three years ago we wrote “At $72.8 Trillion, Presenting The Bank With The Biggest Derivative Exposure In The World” in which we introduced a bank few until then had imagined was the riskiest in the world.

As we explained then “the bank with the single largest derivative exposure is not located in the US at all, but in the heart of Europe, and its name, as some may have guessed by now, is Deutsche Bank. The amount in question? €55,605,039,000,000. Which, converted into USD at the current EURUSD exchange rate amounts to $72,842,601,090,000….  Or roughly $2 trillion more than JPMorgan’s.”

So here we are three years later, when not only did Deutsche Bank just flunk the Fed’s stress test for the second year in a row, but moments ago in a far more damning analysis, none other than the IMF disclosed that Deutsche Bank poses the greatest systemic risk to the global financial system, explicitly stating that the German bank “appears to be the most important net contributor to systemic risks.”

Yes, the same bank whose stock price hit a record low just two days ago.

Here is the key section in the report:

Domestically, the largest German banks and insurance companies are highly interconnected. The highest degree of interconnectedness can be found between Allianz, Munich Re, Hannover Re, Deutsche Bank, Commerzbank and Aareal bank, with Allianz being the largest contributor to systemic risks among the publicly-traded German financials. Both Deutsche Bank and Commerzbank are the source of outward spillovers to most other publicly-listed banks and insurers. Given the likelihood of distress spillovers between banks and life insurers, close monitoring and continued systemic risk analysis by authorities is warranted.

Among the G-SIBs, Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse. In turn, Commerzbank, while an important player in Germany, does not appear to be a contributor to systemic risks globally. In general, Commerzbank tends to be the recipient of inward spillover from U.S. and European G-SIBs. The relative importance of Deutsche Bank underscores the importance of risk management, intense supervision of G-SIBs and the close monitoring of their cross-border exposures, as well as rapidly completing capacity to implement the new resolution regime.

The IMF also said the German banking system poses a higher degree of possible outward contagion compared with the risks it poses internally. This means that in the global interconnected game of counter party dominoes, if Deutsche Bank falls, everyone else will follow.

Notwithstanding moderate cross-border exposures on aggregate, the banking sector is a potential source of outward spillovers. Network analysis suggests a higher degree of outward spillovers from the German banking sector than inward spillovers. In particular, Germany, France, the U.K. and the U.S. have the highest degree of outward spillovers as measured by the average percentage of capital loss of other banking systems due to banking sector shock in the source country

The IMF concluded that Germany needs to urgently examine whether its bank resolution, i.e., liquidation, plans are operable, including a timely valuation of assets to be transferred, continued access to financial market infrastructures, and whether authorities can ensure control over a bank if resolution actions take a few days, if needed, by imposing a moratorium:

Operationalization of resolution plans and ensuring funding of a bank in resolution is a high priority. The authorities have identified operational challenges (e.g., the timely valuation of assets to be transferred, continued access to financial market infrastructures) and are working to surmount them. In some cases, actions to effect resolution may require a number of days to implement, and the authorities should ensure they can maintain control over the bank during this period, including by using their powers to impose a more general moratorium for a specific bank.

Here is the IMF’s chart showing the key linkages of the world’s riskiest bank:

And while DB is number 1, here are the other banks whose collapse would likewise lead to global contagion.

Considering two of the three most “globally systemically important”, i.e., riskiest, banks just saw their stock price scrape all time lows earlier this week, we wonder just how nervous behind their calm facades are the executives at the ECB, the IMF, and the rest of the handful of people who realize just close to the edge of collapse this world’s most riskiest bank (whose market cap is less than the valuation of AirBnB) finds itself right now.

IMF Report | Article Source: ZeroHedge

ECB Blows €400bn on “Brexit Black Friday” Bank Bailouts

Dealing with a Financial Crisis under cover of Brexit Chaos

Remember TARP, the Troubled Asset Relief Program that the US Congress approved to bail out banks and other companies during the Financial Crisis? $700 billion were authorized, later reduced to $475 billion. The Treasury eventually dispersed $432 billion. I bring this up because the ECB bailed out the European banks with more than TARP, in just one day: on Brexit Black Friday.

The ECB saw what was happening to the shares of the largest banks on that propitious day. It saw a blooming financial crisis:

Top UK Banks:

  • HSBC, the apparent winner in this fiasco, perhaps because of its exposure to Asia, -1.4%
  • Barclays: -17.7%
  • Royal Bank of Scotland: -18.0%
  • Lloyds Banking Group: -21.0%

Top German Banks:

  • Deutsche Bank: -15.9% to €13.25, down 59% from April last year, possibly on the way to zero.
  • Commerzbank: -13.6%, to €6.20. The German government still owns nearly 16% of it as a result of the bailout during the Financial Crisis.
  • The third-largest German bank, KfW, is a state-owned institution, so taxpayers are automatically on the hook.

Top French banks:

The fiasco that happened to the Spanish and Italian banks was so enormous that it sent stock markets into their largest one-day plunges on record, of over 12% [ Brexit Blowback Hits Italian and Spanish Banks].

The Stoxx 600 banking index, which covers the largest European banks, plunged 14.5% on Friday. It’s down 29.3% year-to-date, 42% from its 52-week high, and 76% from its all-time high in May 2007 before the Financial Crisis and the euro debt crisis knocked the hot air out of the banks.

But to keep panic at bay, Brexit and the resulting political crisis are used to cover up the blooming financial crisis.

And what a political crisis it is, not just for the UK, but for the EU. No one knows how this will end up. Businesses need certainty. They need to know what money they’re going to use next year, and what the trade and legal frameworks will be. They like to take those things for granted. But now, in the EU, no one can take anything for granted anymore.

Companies with cross-border operations – this includes all major banks and brokerages – have gigantic headaches, and the UK’s 2.2 million financial-sector employees are fidgeting on the edge of their chairs. It might take a couple of years for the UK to actually exit the EU, if it even happens at all, so there’s a little breathing room.

But where there’s apparently no longer any breathing room is with banks, and the ECB went into panic mode.

With bank stocks collapsing on Brexit Black Friday, the frazzled folks at the ECB decided it was high time to start bailing out the banks – and not dabble at the margins, but pull out the whatever-it-takes money-printing machine, and do so under the cover of Brexit chaos when no one was supposed to pay attention.

On Friday, the ECB pulled a huge magic trick, larger than TARP. Under one of its alphabet-soup programs – long-term refinancing operations (LTRO) – it handed teetering banks $399.3 billion, or $444 billion.

€399.3 billion – like a used car is advertised for €19,999.99 – because €400 billion might have been too much of a sticker shock. So let’s round it to €400 billion.

And as central banks do, it didn’t ask legislators for permission. It just did it. Here’s a screenshot of the ECB’s disclosure, with my annotations:

https://i2.wp.com/wolfstreet.com/wp-content/uploads/2016/06/EU-ECB-LTRO-399-billion-2016-06-24.png

Settlement date is Wednesday. This money is going to go somewhere.

Part of it may be mopped up by the liquidity crisis the ECB sees unfolding at the banks.

And part of it might end up in other assets. This sort of thing is supposed to prop stock markets, particularly bank stocks. But since April last year, European stock markets have swooned, despite all the efforts by the ECB. Its flood of liquidity went into bonds, real estate, and into US assets.

This money might pump up prices, perhaps in the most unexpected places, if only briefly. It might even pump up bank stocks. Short sellers should take note.

And the day before Brexit Black Friday, with impeccable timing, the ECB pulled another big one: it leaked to Reuters that it was addressing the nonperforming-loan epidemic among Eurozone banks by sweeping it further under the rug.

The ECB, which regulates 129 Eurozone banks, has estimated that these banks are bogged down in €900 billion ($1 trillion) of bad loans, or 7.1% of all Eurozone bank loans. At some banks, NPLs have reached catastrophic levels: for example, 15% at Italy’s UniCredit.

So instead of forcing the banks to finally take the losses, raise a lot of new capital or topple, the ECB will merely give them “non-binding guidance” by the end of 2016 or early 2017, and some of this “guidance” won’t even be in writing, sources told Reuters with perfect timing the day before Brexit sank these banks.

The ECB doesn’t want to hurt fake earnings. And this leak to Reuters was supposed to have soothed the markets and helped prop up bank stocks.

The thing is, banks that need to raise equity capital must have inflated stock prices or else existing investors get crushed. If Deutsche Bank has to raise €30 billion in capital by issuing shares at €3 a share, existing shareholder will essentially be wiped out, and raising equity capital may no longer be possible. So the name of the game is to manipulate up bank stocks before issuing new shares. But it may be too late.

And this is what happened to Italian and Spanish stock markets, as banks were massacred. Read…  Brexit Blowback Hits Italian and Spanish Banks

by Wolf Richter | WolfStreet


European Banks Get Crushed, Worst 2-Day Plunge Ever, Italian Banks to Get Taxpayer Bailout, Contagion Hits US Banks

European bank stocks just experienced their worst two-day plunge ever in the post-Brexit fallout that rained down on the already blooming European banking crisis.

Healthy big banks would get over Brexit and the political turmoil it is spawning, particularly non-UK banks. But there are no healthy big banks in Europe. And non-UK banks are crashing just as hard, and some harder. This is about a banking crisis morphing into a financial crisis, that has gotten so bad that on Friday, the ECB tried to bail out the banks in its bailiwick with €400 billion – more than the entirety of TARP – in just one day.

These bank stocks got crushed on Friday. And they got crushed again today. Italian banks have been reduced to penny stocks. Spanish banks are getting closer. Commerzbank, Germany’s second largest bank, and still partially owned by the German government as a consequence of the last bailout, is well on the way.

The two-day losses are just breathtaking. This table shows the largest banks by country with their percentage losses for today and for the two-day period:

https://i1.wp.com/wolfstreet.com/wp-content/uploads/2016/06/EU-bank-stocks-2016-06-27.png

Note that the European Stoxx 600 banking index fell 7.6% today for a 21.1% two-day plunge! It isn’t just a few banks whose stocks are collapsing!

Deutsche Bank’s infamous CoCo bonds deserve a special word. These hybrid bonds that are just above equity on the capital totem pole had spiraled down, with the 6% CoCos hitting 70 cents on the euro in February. At that point, they and all other Deutsche Bank bonds were propped up by government verbiage and bank money. The bank ingeniously announced it would buy back its own bonds! Like all these transparent market manipulations, the market ate it up, and even the CoCo bonds jumped to 87 cents on the euro. But that didn’t last long. They have since lost 11.5%, including today’s 3.7% plunge to 77 cents on the euro.

In Italy, the banking crisis that has been growing for years has reduced all major Italian banks to penny stocks. It has triggered bailouts of some banks, including the third largest publicly traded bank, Banca Monte dei Paschi di Siena. Now the taxpayer is going to get shanghaied into bailing them out to put a floor under the collapsing share prices and prevent them from going to zero.

Italian banks are bogged down in a sea of bad debt whose true dimensions are still unknown publicly, and that the ECB publicly estimates to be €360 billion, but every time someone looks at it, it gets larger.

According to “a banking source familiar with the government’s thinking,” as Reuters put it, the Italian government is now fretting about a hedge fund attack on these zombies, following the Brexit turmoil! To counter this attack, the government is trying to figure out how to “protect its banks from a destabilizing sell-off of their shares” that “could tip them into full-blown crisis.”

(I have some news for the Italian government: Your banks have been in full-blown crisis for years!)

The government is thinking about using some kind of taxpayer guarantee and taking a stake in these banks, funded by about €40 billion in new government debt, issued by the second-most indebted government in the Eurozone, after Greece.

According to media reports in Italy, cited by Reuters, the government is already in talks with the European Commission about this sort of bailout. European rules are supposed to end state aid to tottering companies, and collapsing banks are supposed to be wound down involving losses for stock holders and junior bondholders (the bail-ins).

But the government is invoking the exemption in these rules in case of “exceptional events,” which would be the crash of bank stocks, as a consequence of investors figuring out that these Italian banks are toast.

That doesn’t mean that bottom fishers and falling-knife catchers aren’t jostling for position to pick up “bargains” among these European banks, as they have done so many times before, only to see banks stocks, after a brief rally, fall once again to new lows.

Contagion is infecting US banking stocks. As I’m writing this, Goldman Sachs is down -1.1%, Wells Fargo -1.3%, JPMorgan -3.1%, Morgan Stanley -3.1%, Citibank -3.5%, and Bank of American -5.3%.

These wounds among US banks are just cosmetic compared to the bank massacre happening in Europe, where the ECB is now fully engaged in trying to deal with a Financial Crisis under the cover of Brexit Chaos.

by Wolf Richter | WolfStreet

Deutsche Bank Admits To Rigging Markets (video)

Global level fraud, other banks involved, silent mainstream media, what the heck is going on?

It Just Cost Deutsche Bank $25,000 Per Employee To Keep Its Libor Manipulating Bankers Out Of Jail

Is Deutsche Bank’s Gold Manipulation The Main Scam Or Just A Side-Show?

Investigating Deutsche Bank’s €21 Trillion Derivative Casino In Wake Of Admission It Rigged Gold And Silver

Deutsche Bank Confirms Silver Market Manipulation In Legal Settlement, Agrees To Expose Other Banks

What is the end game?

 

 

Pension Funds Sue Big Banks over Manipulation of $12.7 Trillion Treasuries Market

At least two government pension funds have sued major banks, accusing them of manipulating the $12.7 trillion market for U.S. Treasury bonds to drive up profits, thereby costing the funds—and taxpayers—millions of dollars.

As with another case earlier this year, in which major banks were found to have manipulated the London Inter bank Offered Rate (LIBOR), traders are accused of using electronic chat rooms and instant messaging to drive up the price that secondary customers pay for Treasury bonds, then conspiring to drop the price banks pay the government for the bonds, increasing the spread, or profit, for the banks. This also ends up costing taxpayers more to borrow money.

In the latest complaint, the Oklahoma Firefighters Pension and Retirement System is suing Barclays Capital, Deutsche Bank, Goldman Sachs, HSBC Securities, Merrill Lynch, Morgan Stanley, Citigroup and others, according to Courthouse News Service. Last month State-Boston Retirement System (SBRS) filed a similar complaint against 22 banks, many of which are the same defendants in the Oklahoma suit.

“Defendants are expected to be ‘good citizens of the Treasury market’ and compete against each other in the U.S. Treasury Securities markets; however, instead of competing, they have been working together to conclusively manipulate the prices of U.S. Treasury Securities at auction and in the when-issued market, which in turn influences pricing in the secondary market for such securities as well as in markets for U.S. Treasury-Based Instruments,” the Oklahoma complaint states.

The State-Boston suit, which named Bank of America Corp’s Merrill Lynch unit, Citigroup, Credit Suisse Group, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, UBS and 14 other defendants, makes similar charges.

SBRS uncovered the scheme when it hired economists to analyze Treasury securities price behavior, which pointed to market manipulation by the banks.

“The scheme harmed private investors who paid too much for Treasuries, and it harmed municipalities and corporations because the rates they paid on their own debt were also inflated by the manipulation,” Michael Stocker, a partner at Labaton Sucharow, which represents State-Boston, said in an interview with Reuters. “Even a small manipulation in Treasury rates can result in enormous consequences.”

Both the suits are seeking treble unnamed damages from the financial institutions involved. The LIBOR action earlier this year involved a settlement of $5.5 billion.

The U.S. Justice Department has reportedly launched its own investigation into the alleged Treasury market conspiracy.

by Steve Straehley in allgov.com

To Learn More:

Banks Rigged Treasury Bonds, Class Claims (by Lorraine Baily, Courthouse News Service)

State-Boston Retirement System, on behalf of itself and v. Bank of Nova Scotia (Courthouse News Service)

Lawsuit Accuses 22 Banks of Manipulating U.S. Treasury Auctions (by Jonathan Stempel, Reuters)

Four Banks Guilty of Currency Manipulation but, as Usual, No One’s Going to Jail (by Steve Straehley and Noel Brinkerhoff, AllGov)