Freddie Mac filed suit against Bank of America, Citigroup, JPMorgan Chase and 12 other banks, as well as the British Bankers Association for allegedly manipulating the London interbank offered rate causing the government-sponsored enterprise to suffer major financial losses as a result, Bloomberg reported March 20.
The GSE accused the banks of committing fraud, violating antitrust laws and committing breaches of contract by collectively acting to hold down the U.S. dollar compared to LIBOR in an effort to cover up financial problems and boost profits. Some $300 trillion in loans, mortgages and other financial products are linked to LIBOR.
Richard Leveridge, an attorney for Freddie Mac, said in the complaint filing that the “defendants’ fraudulent and collusive conduct caused USD LIBOR to be published at rates that were false, dishonest and artificially low,” Bloomberg reported.
The GSE is seeking damages for financial harm, punitive damages and treble damages for violations of the Sherman Act.
Bloomberg reported that LIBOR manipulation could have cost Freddie Mac — as well as Fannie Mae — a combined $3 billion. Freddie and Fannie both use LIBOR to decide interest payments on their investments in floating-rate financial products like bonds and swaps. Freddie’s complaint alleges that the defendants’ conspiracy lasted from August 2007 through May 2010.
Bank representatives declined to comment to Bloomberg on the suit.