By Andre Damon, 31 March 2010
As states and cities throughout the United States slash social spending to pay their debts, major Wall Street firms have been accused of conspiring to drive up prices on loans to local governments.
Lehman Brothers, JPMorgan Chase & Co., and UBS, together with over a dozen other financial companies, colluded to drive up interest rates on bonds to states and cities, according to a class-action lawsuit filed by the State of Mississippi, together with other local governments.
The group alleges that these financial companies assigned negotiated bids amongst themselves to limit competition and ensure that cities, states, and small foundations paid them high interest rates on municipal bonds.
Last week, U.S. District Judge Victor Marrero refused a request to block the lawsuit, which was re-filed with more details and fewer defendants, after being tossed out last year. The case “is replete with detailed allegations regarding the acts in furtherance of the conspiracy,” the judge said in allowing the case to go forward.
The accusation by the State of Mississippi overlaps with a criminal investigation into CDR Financial Products Inc., a financial advisor for local governments. Charges were filed against the firm alleging that it took kickbacks from major banks in exchange for advising local governments to do business with them. The alleged payments, ranging from $4,500 to $475,000, were paid out between 2001 and 2005.
MORE: http://www.wsws.org/articles/2010/mar2010/bidr-m31.shtml
