Robert "Bob" Diamond, former chief executive officer of Barclays Plc, leaves Portcullis House in London, U.K., on Wednesday, July 4, 2012. (Chris Ratcliffe/BLOOMBERG)

Dozens of states, cities and other government entities are exploring whether they lost money because of the alleged manipulation of a crucial benchmark used to set interest rates on hundreds of trillions of dollars worth of loans and investments.

Baltimore City is leading a federal lawsuit against the group of big banks that set Libor, the London interbank offered rate, accusing it of conspiring to suppress the benchmark. The banks named in the case include JPMorgan­ Chase, Bank of America, Barclays, Citi­Bank and Deutsche Bank.

In a lawsuit filed in federal court in Manhattan, Baltimore said the banks kept Libor artificially low during the financial crisis and its immediate aftermath, robbing the city of millions of dollars in returns on investments such as interest-rate swaps.

Swaps are financial instruments used by many government agencies that fund public infrastructure such as transit systems, water­works and stadiums that allow the agencies to exchange the floating interest rates promised to bond investors for fixed rates paid by banks, making future budgets more predictable.

The investment earnings allegedly lost in the swap deal could have helped cash-strapped Baltimore balance its budget without resorting to all of the service cuts and payroll reductions that it was forced into during the financial crisis.

The Baltimore suit has been consolidated with dozens of cases filed by others that say they suffered financial losses from the alleged scheme, including pension funds, municipalities and mutual funds.

“We have no sense of scale of loss,” said Michael Hausfeld, the lead attorney on the complaint. “At this point, it is too early to estimate. We know the volume of transactions is huge.”

Since the suit was consolidated in the spring, Hausfeld said he has heard from dozens of other government entities trying to determine whether they were hurt financially and should also bring legal action.

Peter Shapiro, managing director of New Jersey-based Swap Financial Group, said the losses could be major. If a government entity had $1 billion worth of swaps in the three-year period cited in the suit and the banks managed to suppress Libor by just 0.20 percent, it would cost that entity $6 million.

“That would pay for a lot of nurses, policemen or transit workers,” he said.

George Maragos, the comptroller of Nassau County, N.Y., issued a statement this week saying that the alleged Libor rigging could have cost the county as much as $13 million.

The state of Virginia is among the government entities waiting for more details to emerge so it can determine whether it lost money on its Libor-related investments.

“The methodology is still missing to determine what the economic cost was for those who were hurt,” said Tim Wil­hide, director of cash management and investments in the Virginia treasurer’s office.

For their part, the banks named in the suit deny the allegations and have filed a motion for the case to be dismissed. They argue that they would not have benefited by keeping rates low, because even if the banks paid less interest on investment instruments they sold, they would have earned less on their loans. In addition, if the banks wanted to hide their weakness by keeping Libor low, as the suit alleges, they would not want their competitors to know, the motion says.

Finally, the banks argue that Libor, while widely used as an interest rate benchmark, is a mere index — not a fixed price — that banks are free to deviate from when setting rates for their loan and investment products.

Late last month, London-based Barclays, one of world’s largest banks, admitted that it schemed to rig the benchmark rate during the financial crisis, leading to the resignation of several top executives.

The bank also released documents implying that Britain’s central bank was involved in the plan. A host of regulators, lawmakers and law enforcement agencies around the globe, including the U.S. Justice Department, is investigating.