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Big banks settle Fannie Mae, Freddie Mac bond rigging litigation in U.S.

Christian Fernsby |
Thirteen prominent banks and financial services companies agreed to pay $337 million to resolve claims by investors that they conspired to rig prices of bonds issued by mortgage companies Fannie Mae and Freddie Mac for a decade.

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The preliminary settlements, filed in federal court in Manhattan, require a judge’s approval and would conclude private nationwide antitrust litigation brought against 16 defendants, with settlements totaling $386.5 million.

Barclays, which underwrote the most Fannie Mae and Freddie Mac bonds, will pay $87 million.

Bank of America, BNP Paribas, Cantor Fitzgerald, Citigroup, Credit Suisse, HSBC, JPMorgan Chase, Morgan Stanley, Nomura, Societe Generale, Toronto-Dominion and UBS will separately pay a combined $250 million.

The banks denied wrongdoing in agreeing to settle. Deutsche Bank, Goldman Sachs and units of Tennessee’s First Horizon previously settled for a combined $49.5 million.

Investors including Pennsylvania Treasurer Joe Torsella had accused the defendants of exploiting their market dominance to overcharge for Fannie Mae and Freddie Mac bonds from Jan. 1, 2009, to Jan. 1, 2019, and keep more profit for themselves.

The civil case began after a published report said the U.S. Department of Justice had opened a criminal price-fixing probe related to the bonds.

According to an amended complaint, the 16 defendants underwrote $3.97 trillion, or 77.2%, of Fannie Mae and Freddie Mac bonds from Jan. 1, 2009, to Jan. 1, 2016.

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