More On Legal & Compliancefrom The Advisor's Professional Library
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Freddie Mac is on the attack.
The government-sponsored enterprise (FMCC) sued Bank of America Corp. (BAC), UBS (UBSN), JPMorgan Chase & Co. (JPM) and a dozen other banks in the U.S. District Court for the Eastern District of Virginia, over alleged manipulation of the London interbank offered rate, which supposedly caused the mortgage giant substantial losses.
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 Bloomberg, which cites the filing.
“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, made public on Tuesday.
LIBOR is the interest rate at which banks can borrow funds from other banks in the London interbank market. The rate is fixed each day by the British Bankers' Association. It is the most common benchmark interest rate index used to calculate adjustable rate mortgages. The LIBOR scandal alleges collusion among big banks to artificially manipulate the rate in their favor, and has rocked firms and governments across the globe, resulting in fines and penalties and the dismissal of key executives.
The news service notes that the complaint lists 15 banks as defendants as well as the British Bankers’ Association. They include Citigroup (C), Barclays, Royal Bank of Scotland Group (RBS), the Royal Bank of Canada, Deutsche Bank and Credit Suisse Group (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 company said in the complaint, according to Bloomberg.