Banks settle bond pricing claims for $ 337 million

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Institutional investors have won the latest in a series of settlements against banks accused of rigging the $ 550 billion market for bonds backed by Fannie Mae and Freddie Mac.

Under a preliminary agreement filed on Monday, 13 banks and financial services firms will pay $ 337 million to settle antitrust allegations by investors, Barclays, which has underwritten the most Fannie Mae and Freddie Mac bonds, contributing up to $ 87 million.

The other defendants – including Bank of America, Citigroup, HSBC, JPMorgan Chase, Morgan Stanley and UBS – will separately pay $ 250 million.

With Deutsche Bank, Goldman Sachs and units of Tennessee’s First Horizon having previously settled for a combined $ 49.5 million, the latest deal brings the total payment to $ 386.5 million.

Investors including Pennsylvania Treasurer Joe Torsella accused the banks in a March 2019 class action lawsuit of exploiting their dominant market position to overcharge Fannie Mae and Freddie Mac, or a government-sponsored entity (GSE ), bonds from January 1, 2009 to January. 1, 2019, and keep more profit for themselves.

Torsella’s office noted that many municipalities are limited by law to investing only in GSEs or federally guaranteed bonds. “Price manipulation of any kind in this market harms these entities and steals taxpayer money,” he said in a press release.

Investors cited online chat messages in which traders representing defendant banks agreed to artificial prices before putting the bonds on the market.

“The evidence in this case was particularly overwhelming,” Torsella said. “The brazen attitude of Wall Street traders towards institutional public buyers of GSE bonds was shocking.”

The 16 defendants subscribed to $ 3.97 trillion, or 77.2%, of Fannie Mae and Freddie Mac bonds from January 1, 2009 to January 1, 2016. The regulations also require them to establish and maintain an antitrust compliance program. effective.

“My goal in this matter has been and remains to reform the government sponsored entity bond market… so that this conduct is not only corrected, but prevented,” Torsella said.

Fannie Mae and Freddie Mac have been under trusteeship established by the Federal Housing Finance Agency since taxpayers bailed them out in September 2008.

Photo by Chip Somodevilla / Getty Images

antitrust, class action, Fannie Mae, Freddie Mac, government sponsored entities, Joe Torsella, pricing, settlement


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