In an antitrust lawsuit filed Wednesday night, Philadelphia named Bank of America, Barclays, Citigroup, Goldman Sachs Group, JPMorgan Chase & Co, the Royal Bank of Canada and Wells Fargo. The city said the banks secretly manipulated rates for variable-rate demand obligations (VRDO), which are tax-exempt bonds. It said it issued more than US$1.6 billion of those bonds, and that the banks colluded to collect hundreds of millions in unearned fees; the city alleges that this reduced vital funding for public services like hospitals, schools and transportation. (Reuters)

Talking point: VRDOs allows municipal governments to borrow money over an extended period while paying short-term interest rates to investors. The “put” option means investors can sell the bond early at a specified price and bankers can charge for the service of remarketing it. These bonds’ prices reset every week according to market interest rates; they’re known for being among the most affordable financing options. Philadelphia alleges that the banks formed a “cartel” to keep the bonds’ interest rates “artificially high” to attract investors at the city’s expense. The city also said the U.S. Department of Justice’s antitrust division is conducting a preliminary criminal probe into the banks’ activity; the U.S. Securities and Exchange Commission has contacted four of them.