Variable-rate bonds

With class certification now in hand, the cities that brought the lawsuit have two weeks to outline how other municipalities will be provided notice of the chance to join.

The Illinois Attorney General maintains it is unclear whether the state was even defrauded by the Wall Street banks that are accused of rate-rigging by a whistleblower.

The group of banks would pay $68 million to settle the lawsuit, which originally estimated damages at $340 million.

The plaintiff that brought the case on behalf of the state says the banks inflated interest rates through a private, invitation-only VRDO index that influenced SIFMA's weekly index.

The Illinois case is part of several state-level lawsuits brought by Minnesota-based municipal advisor Johan Rosenberg, accusing banks of conspiring to set the interest rates of state-issued VRDOs artificially high.

It's one of four state cases accusing Wall Street banks of a "robo-resetting" scheme that kept interest on variable-rate debt artificially high.

Variable-rate debt, tender option bonds and even prepaid gas bonds may stage a comeback in the current market, panelists at a GFOA conference said.

Recent court decisions have the potential to up the ante in lawsuits accusing major banks of manipulating the variable-rate market.

John Hallacy talks with Chip Barnett about how fiscal and monetary policy is affecting the municipal bond market. He discusses recent data releases, supply forecasts and the midterm elections and the future of ESG in public finance. (20 minutes)

The inclusion of swaps has the potential to increase claimed damages in the New York State lawsuit, though banks view swap materials as providing a potential defense.