Fred­die Mac sues banks over Li­bor ma­nip­u­la­tion

The Pak Banker - - 6BUSINESS -

Fred­die Mac (FMCC) sued Bank of Amer­ica Corp., UBS AG (UBSN), JPMor­gan Chase & Co. (JPM) and a dozen other banks over al­leged ma­nip­u­la­tion of the Lon­don in­ter­bank of­fered rate, say­ing the mort­gage fi­nancier suf­fered sub­stan­tial losses as a re­sult of the com­pa­nies’ con­duct.

Government-owned Fred­die Mac ac­cuses the banks of act­ing col­lec­tively to hold down the 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 yes­ter­day.

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 car- ried 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.

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

Fred­die Mac ac­cuses the banks of fraud, vi­o­la­tions of an­titrust law and breach of con­tract. The hous­ing fi­nancier is seek­ing un­spec­i­fied dam­ages for fi­nan­cial harm, 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 U.S.-owned com­pany said 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.

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.

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