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Freddie Mac Files Suit over Losses Due to Alleged LIBOR Manipulation
On March 14, Freddie Mac sued 15 banks and the British Bankers’ Association (BBA), claiming that the institutions manipulated the London Interbank Offered Rate (LIBOR) and caused substantial losses to Freddie Mac on investment activities tied to LIBOR. Fed. Home Loan Mortg. Corp. v. Bank of Am. Corp., No. 13-342 (E.D. Va. filed Mar. 14, 2013). LIBOR is a global benchmark rate used in financial products and transactions, and during the time period covered by the complaint it was set using data from the banks, under the auspices of the BBA. Freddie Mac alleges that the banks deliberately suppressed the rate to hide their financial condition and boost profits, while the BBA participated in the rate fixing to protect revenue generated by selling LIBOR licenses. As a result, Freddie Mac claims it suffered losses on pay-fixed, receive-floating interest rate swap transactions indexed to LIBOR, and mortgage-backed securities in which coupon payments or the underlying collateral were indexed to LIBOR. The mortgage financing enterprise, which currently is in U.S. government conservatorship, alleges that the banks engaged in fraud, breached their contracts with Freddie Mac, and violated antitrust laws. Freddie Mac seeks full damages for all economic, monetary, actual, consequential, and compensatory damages, treble damages under the Sherman Act, and punitive damages. Some of the banks already have settled civil and criminal enforcement actions by U.S. and foreign authorities, and the institutions face other private claims related to the alleged LIBOR conduct.