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The Canary Wharf headquarters of Barclays Bank, who have been fined 290 million GBP for manipulating the Libor inter-bank lending rate, on June 28, 2012 in London, England. - 

Jeff Horwich: The other shoes have finally dropped in the LIBOR investigation. Seven other shoes, in fact. Attorneys general in New York and Connecticut have subpoenaed seven of the world's biggest banks, including Citigroup and JPMorgan Chase here in the U.S. In broad strokes, the allegations are similar to the ones Barclays settled last month: that the banks abused their power when self-reporting the LIBOR interest rate -- the rate banks use when lending to each other.

James Cox is an expert on securities law at Duke University Law School. Good to talk with you.

James Cox: Great to be here.

Horwich: Does this have the makings of a conspiracy here? In other words, is there a sense that these banks -- all seven of them -- have been working together?

Cox: Well, certainly, every indication is that that's happening. And from the very moment that the story broke with Barclays, it would be very clear to those close to the market that Barclays was low-balling its rates, and then everybody else could say, "Well, maybe this is what we ought to be doing." So I would say this has all the markings of a tacit conspiracy.

Horwich: These are state attorneys generals here who have issued subpoenas -- which means they're looking to get justice, probably some compensation, for wronged constituents of some kind. If these banks were manipulating LIBOR, remind us, who would have been hurt by this?

Cox: LIBOR is a little bit like water, in the sense that it is, in the financial markets, the universal solvent; it's used everywhere. We find municipalities facing securities lending rates that have a heavy LIBOR component to them. Decisions about when to go into markets are guided by what's happening in LIBOR. It's not possible a year from now -- or maybe even five years from now -- to fully assess the effect of the conduct of fixing the LIBOR rate. This is mammoth.

Horwich: Is this the end of things, do you think?

Cox: You know, I think it's a shot in the arm for the legal profession who will be involved with these lawsuits for decades to come; creating huge demand. And it's going to be a constant financial albatross for the rest of the banks.

Horwich: Duke University law professor James Cox. Thank you.

Cox: OK.


Follow Jeff Horwich at @jeffhorwich