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The New York Times' Dealbook says Baltimore's City Solicitor is "leading a battle in Manhattan Federal Court" against banks involved in the LIBOR scandal. "As unemployment climbed and tax revenue fell, the city of Baltimore laid off employees and cut services in the midst of the financial crisis. Its leaders now say the city's troubles were aggravated by bankers' manipulation of a key interest rate linked to hundreds of millions of dollars the city had borrowed." There's not much detail about the specific suit (who are the defendants? When was it filed? etc.) but never mind that for now, because you might not know what LIBOR is. LIBOR stands for London Inter-Bank Offered Rate. It's the rate of interest that banks charge to lend each other money over night, or for loans up to 90 days. LIBOR is also a foundational interest rate on millions of other financial deals with sliding rates. Typically a person with, say, an adjustable rate home loan, will pay LIBOR plus two percent, or five, or whatever. Here's a primer from last week's The Economist magazine to get you up to speed on this. Turns out the banks told London regulators that they were offering rates to each other that were much lower than what they were really offering--and really paying. This was during the financial crisis of 2007 and 2008. Banks didn't want anyone to know how bad things were. They also made a bit of money on other deals that paid them more (or saved them money) if the interest rate was lower. Those were the deals with cities like Baltimore. The interest rates were lower so a payment stream the city would have received in a deal was smaller, or disappeared. Dealbook's Nathaniel Popper quoted Baltimore City Solicitor George Nilson. "The injury we suffered during the time we suffered it hurt more because we were challenged budgetarily," Mr. Nilson said. "Every dollar we lost due to illegal conduct was a dollar we couldn't pay to keep open recreation centers or to pay police officers."

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