Tags: Freddie | Banks | Libor | Rigging

Freddie Mac Sues Big Banks Over 'Substantial' Losses on Libor

Tuesday, 19 Mar 2013 08:02 PM

Freddie Mac sued Bank of America Corp., UBS AG, JPMorgan Chase & Co. and at least 12 other banks over alleged manipulation of the London interbank offered rate, saying the companies’ conduct caused the mortgage financier substantial losses.

Government-owned Freddie Mac accuses the banks of acting collectively to suppress U.S. dollar Libor to “hide their institutions’ financial problems and boost their profits,” according to a complaint filed in federal court in Alexandria, Virginia.

“Defendants’ fraudulent and collusive conduct caused USD LIBOR to be published at rates that were false, dishonest, and artificially low,” Richard Leveridge, a lawyer for Freddie Mac, said in the complaint, which was made public Thursday.

Manipulation of interest rates by some of the world’s biggest banks has spawned probes by half a dozen agencies on three continents in what has become the industry’s largest and longest-running scandal. More than $300 trillion of loans, mortgages, financial products and contracts are linked to Libor.

Libor is calculated by a poll carried out daily by Thomson Reuters Corp. on behalf of the British Bankers’ Association, an industry lobby group that asks firms to estimate how much it would cost to borrow from each other for different periods and in different currencies.

Dozen Banks

The complaint lists 15 banks as defendants as well as the British Bankers’ Association. They include Citigroup Inc., Barclays Plc, Royal Bank of Scotland Group Plc, the Royal Bank of Canada, Deutsche Bank AG and Credit Suisse Group AG.

Freddie Mac’s claims involve fraud, antitrust violations and breach of contract. The agency is seeking unspecified damages for financial harm suffered by Freddie Mac, as well as punitive damages and treble damages for violations of the Sherman Act.

“To the extent that defendants used false and dishonest USD LIBOR submissions to bolster their respective reputations, they artificially increased their ability to charge higher underwriting fees and obtain higher offering prices for financial products to the detriment of Freddie Mac and other consumers,” the agency alleged in the complaint.

Representatives of the banks who declined to comment on the lawsuit include Danielle Romero-Apsilos, a spokeswoman for New York-based Citigroup,, Jennifer Zuccarelli, a spokeswoman for New York-based JPMorgan, Brandon Ashcraft, a Barclays spokesman, Bill Halldin, a Bank of America spokesman, and Victoria Harmon, a spokeswoman for Credit Suisse and Shella Ali, a Lloyds spokeswoman.

Ed Canaday, a spokesman for Edinburgh-based Royal Bank of Scotland, Brian Mairs, a spokesman for British Bankers Association and Eberhard Roll, a Portigon AG spokesman, didn’t immediately respond to e-mail and phone messages requesting comment.

The case is Federal Home Loan Mortgage Corp. v. Bank of America Corp., 13-cv-00342, U.S. District Court, Eastern District of Virginia (Alexandria).

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