Fannie Mae sued nine of the world’s largest banks on Thursday, accusing them of colluding to manipulate interest rates and seeking more than US$800 million of damages.
In a complaint filed in the US District Court in Manhattan, the government-controlled mortgage company accused the banks of conspiring for many years to suppress the London interbank offered rate (Libor), including during the 2008 financial crisis.
Libor underpins hundreds of trillions of dollars of transactions and is used to set interest rates on such things as credit cards, student loans and mortgages.
But according to Thursday’s 71-page lawsuit, “defendants’ promises and representations regarding the legitimacy of Libor were false”, causing Fannie Mae to lose money on swaps, mortgages, mortgage securities and other transactions.
The lawsuit adds to the legal headaches over whether banks manipulated Libor and other rate benchmarks to boost profit or appear healthier than they actually were.
Regulators in the United States, Europe and Asia have been investigating many banks over alleged manipulation of Libor and other rate benchmarks.
Four banks sued by Fannie Mae – Barclays, Rabobank, Royal Bank of Scotland and UBS – have reached regulatory settlements that totalled US$3.6 billion and included admissions of wrongdoing.