Carl Payne

You may not share my tastes in this sort of thing but I’m going to go ahead and give American Banker a gold star for the headline “Libor-Rigging Set Interest Rates Too Low, Too High and So Low They Were Too High.” The reference is to this Journal article about the mishegas of Libor lawsuits. Since every bank seems to have manipulated Libor, and in different directions at different times, you get to sort of take your pick about what you want to sue over. And so some borrowers are suing banks for setting Libor too low, some municipal swaps counterparties etc. are suing banks for setting Libor too high, and one cable-car driver is taking the second derivative:

Carl Payne, a 72-year-old former cable-car driver in San Francisco, alleged in a federal-court suit filed in December that manipulating interest rates lower inflated margins on adjustable-rate mortgages tied to U.S. dollar Libor. The law firm acting on Mr. Payne’s proposed class action suit, Baron & Budd P.C., estimates that about a million mortgages were affected.

The interest rate on the mortgage for his condominium is based on the one-year rate plus a 2.25-percentage-point margin that is fixed over the life of the 30-year loan. Because the rate when he took out the mortgage was artificially low, Mr. Payne says, he was locked into a higher margin than he should have been.

This is obviously my favorite! I’ve been making this argument since July and I sort of assumed I was kidding, but no, Mr. Payne is right there with me: Read more »