Fannie Mae sued nine of the world's largest banks on Thursday, accusing them of colluding to manipulate interest rates and seeking more than $800-million of damages.
In a complaint filed in the U.S. District Court in Manhattan, the government-controlled mortgage company accused the banks of conspiring for many years to suppress Libor, or the London Interbank Offered Rate, 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.
U.S. and European regulators have been investigating claims that many banks manipulated Libor and other rate benchmarks to boost profit or appear healthier than they actually were.
Four of the banks sued by Fannie Mae – Barclays Plc , Rabobank, Royal Bank of Scotland Group Plc and UBS AG – have previously settled with regulators over similar allegations and admitted wrongdoing.
The other bank defendants are Bank of America Corp, Citigroup Inc, Credit Suisse Group Inc, Deutsche Bank AG and JPMorgan Chase & Co.
Freddie Mac, another government-controlled mortgage company, filed a similar lawsuit in March against more than a dozen banks.
Rabobank did not immediately respond to requests for comment. The remaining banks declined to comment.
The lawsuit describes emails and other communications that illustrate the alleged collusion, such as where one rate submitter at Rabobank admitted to have "always used to ask if anyone needed a favour and vice versa ... a little unethical but always helps to have friends in (the market)."
According to the complaint, the banks' Libor submissions were "particularly striking" on days where they settled large swap positions with Fannie Mae. The company estimated that it lost $332-million on interest-rate swaps alone.
"Fannie Mae filed this action to recover losses it suffered as a result of the defendants' manipulation of Libor," a spokesman said. "We have a responsibility to be good stewards of our resources."
The U.S. government bailed out Fannie Mae and Freddie Mac in 2008. Both companies are now overseen by the Federal Housing Finance Agency (FHFA), which tries to conserve and recover assets for the benefit of taxpayers.
In 2011, the FHFA sued 18 banks and financial companies to recover losses that it said Fannie Mae and Freddie Mac suffered on about $200-billion of mortgage securities.
JPMorgan last week became the fourth defendant to settle in that litigation, agreeing to pay $4-billion.
Fannie Mae's lawyers include Kathy Patrick, a partner at Gibbs & Bruns who represents investors that negotiated an $8.5-billion settlement with Bank of America over mortgage securities from the former Countrywide Financial Corp. She declined to comment on the Fannie Mae lawsuit.
The case is Federal National Mortgage Association v. Barclays Bank Plc et al, U.S. District Court, Southern District of New York, No. 13-07720.