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May
2013
21

Sheet Metal Workers in Ohio Sue 12 Banks Over Pension Fund Mismanagement

Sheet Metal Workers from Local 33 in Parma, Ohio are taking action against 12 major banks who they say have restrained competition for credit default swaps (CDS) between 2008 and 2011. Local 33′s Cleveland District Pension Plan has filed a lawsuit pursuing a jury trial and class action status to determine if the banks violated U.S. antitrust laws.  According to papers filed on behalf of the union pension plan:

The CDS market has been starkly divided between those who control and distort the market and those who, in order to participate in the market, must abide their distortions.”

Banks named in the lawsuit include CitiGroup, Goldman Sachs Group Inc., Bank of America Corp., Deutsche Bank AG, and UBS AG. The lawsuit seeks damages done to the “buy side” by the “sell side” in CDS contracts during the recession.  Credit default swaps, as explained by Bloomberg Buisnessweek:

Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. The contracts, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, decline as investor confidence improves and rise as it deteriorates.

In Europe, a similar legal battle has been ongoing since 2011. The EU is investigating anti-competitive activities in their $24.3 million CDS ,arket:

That probe expanded in March to include whether the ISDA, a trade association, has been involved in an effort to delay or prevent exchanges from entering the credit derivatives business.

In 2011, the EU began investigating whether Deutsche Bank, Citigroup and 14 other lenders had engaged in collusion by giving pricing information to Markit Group Ltd., a London-based financial information business owned in part by 16 banks.

The transparency, or lack thereof, with which financial institutions operate in our economy needs to be addressed. The Obama Administration has been unwilling to apply sufficient pressure on these institutions to affect permanent changes to the landscape that allows dangerous and irresponsible bank practices. Local 33′s defense of its union pension fund is a precedent-setting effort which demands that the misdeeds of those responsible for bringing about recession do not go unpunished.  

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