Fannie Mae sued nine banks, alleging that their manipulation ofthe benchmark London interbank offered rate (Libor), which four ofthem have admitted, cost the mortgage-financing company about $800million.

The U.S. government-owned firm alleged that the banks, includingBank of America Corp., JPMorgan Chase & Co., and CitigroupInc., acted to suppress the rate through quotes they submitted tothe British Bankers Association, according to the complaint filedyesterday in Manhattan federal court.

Global authorities have been investigating claims that more thana dozen banks altered submissions used to set benchmarks such asLibor to profit from bets on interest-rate derivatives or to makethe lenders' finances appear healthier.

The alleged suppression of the rate caused Washington-basedFannie Mae to lose as much as $332 million on interest-rate swapswith Barclays Plc, UBS AG, Royal Bank of Scotland Plc, DeutscheBank AG, Credit Suisse Group AG, Bank of America, Citigroup, andJPMorgan, according to the complaint.

“Defendants initially took these and other overt acts describedabove to further the corrupt agreement between them and to carryout a common plan to execute a fraud on Fannie Mae and to benefitdefendants,” the company claimed.

The lawsuit includes claims of breach of contract and breach ofimplied duty of good faith and fair dealing against all ofdefendants except Rabobank International NA. All nine were sued forcommon law fraud as well as aiding and abetting. Fannie Mae seeksdamages including consequential damages, punitive damages,prejudgment interest and attorneys' fees.

Rene Loman, a spokesman for Utrecht, Netherlands-based Rabobank,said the claims against the bank were without merit and it woulddefend itself vigorously.

Deutsche Bank spokeswoman Renee Calabro, UBS spokeswoman KarinaByrne, JPMorgan spokesman Brian Marchiony, Citigroup spokesman MarkCostiglio, Barclays spokeswoman Kerrie Cohen, Credit Suissespokesman Jack Grone, and RBS spokesman Ed Canaday and declined tocomment on the lawsuit.

Bill Halldin, a Bank of America spokesman, didn't immediatelyreturn a call yesterday seeking comment on it.

In March, mortgage financier Freddie Mac, also owned by theU.S., sued more than a dozen banks over similar allegations.

Manipulation of interest rates by some of the world's biggestbanks has spawned probes by half a dozen agencies on threecontinents in what has become the industry's largest andlongest-running scandal. More than $300 trillion of loans,mortgages, financial products and contracts are linked toLibor.

Libor Poll

Libor is calculated by a poll carried out daily by ThomsonReuters Corp. on behalf of the British Bankers' Association, anindustry lobby group that asks firms to estimate how much it wouldcost to borrow from each other for different periods and indifferent currencies.

Fannie Mae and Freddie Mac could have lost a combined $3 billionbecause of Libor manipulation, the auditor of the Federal HousingFinance Agency said in an internal memo last year urging theregulator to investigate further.

Freddie Mac and Fannie Mae use Libor to determine interestpayments on their investments in floating-rate financialinstruments such as bonds and swaps. The two companies, whichpackage mortgages into securities on which they guarantee paymentsof principal and interest, have been under U.S. conservatorshipsince 2008.

The case is Federal National Mortgage Association v. BarclaysBank Plc, 0:13-cv-07720, U.S. District Court, Southern District ofNew York (Manhattan).

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.