Fannie Mae sued nine major banks over allegations their manipulation of the London interbank offered rate cost the mortgage financing company about $800 million. Libor is used to set global interest rates on financial products such as credit cards and mortgages.
The U.S. government-owned firm alleged that banks including Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. acted to suppress the rate, according to a copy of the complaint filed Thursday in Manhattan federal court.
Other banks named include Barclays, Credit Suisse, Deutsche Bank, Rabobank, Royal Bank of Scotland and UBS. Fannie also is suing the British Bankers' Association.
In March, Freddie Mac filed a lawsuit against 15 Libor-granting banks for alleged fraud. Last month, the National Credit Union Association sued 13 banks for alleged Libor manipulation. Four of the banks named in the Fannie Mae suit have been fined a combined $3.6 billion by U.S. and British regulators for unauthorized manipulation of the Libor.
The Wall Street Journal dubs Fannie's suit "the latest legal salvo by the mortgage-finance giants."
Earlier this week, Rabobank CEO Piet Moerland stepped down following a $1.07 billion settlement over Libor rate-rigging allegations. UBS, Barclays and Royal Bank of Scotland also have reached settlements with global regulators.
New York Times columnist Floyd Norris argues the hefty fines associated with these settlements have done little to fix the system. "Unfortunately, nothing fundamental is being changed," he writes. "Libor lives on. Regulators who wanted to change that have been outmaneuvered by those who did not want to risk damaging one of the biggest and most lucrative markets around."
The lawsuit includes claims of breach of contract, breach of implied duty of good faith and fair dealing against all the defendants except Rabobank International NA. All nine were sued for common law fraud as well as aiding and abetting. Fannie is seeking damages including consequential damages, punitive damages, prejudgment interest and attorneys' fees.