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

NEW YORK (Reuters) - 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 FNMA.PK and Freddie Mac FMCC.PK for a decade.

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The preliminary settlements, filed late Monday night 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 BARC.L, which underwrote the most Fannie Mae and Freddie Mac bonds, will pay $87 million.

Bank of America BAC.N, BNP Paribas BNPP.PA, Cantor Fitzgerald, Citigroup C.N, Credit Suisse CSGN.S, HSBC HSBA.L, JPMorgan Chase JPM.N, Morgan Stanley MS.N, Nomura 8604.T, Societe Generale SOGN.PA, Toronto-Dominion TD.TO and UBS UBSG.S will separately pay a combined $250 million.

The banks denied wrongdoing in agreeing to settle. Deutsche Bank DBKGn.DE, Goldman Sachs GS.N and units of Tennessee's First Horizon FHN.N 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.

A spokeswoman for Barclays declined to comment on Tuesday.

In a statement, Torsella said the settlement also calls for strong oversight and compliance programs, to help ensure that the alleged misconduct “is not only corrected, but that it is prevented.”

The Manhattan court is home to an array of private litigation accusing banks of conspiring to move various bond, commodity and currency markets.

Fannie Mae and Freddie Mac guarantee more than half of U.S. mortgages.

The so-called government-sponsored enterprises, or GSEs, have been in conservatorships established by the Federal Housing Finance Agency since taxpayers bailed them out in September 2008, with profits swept to the U.S. Treasury.

On Sept. 5, the White House announced a plan to return Fannie Mae and Freddie Mac to the private sector. FHFA Director Mark Calabria has said he hopes to complete the process by 2024.

The case is In re: GSE Bonds Antitrust Litigation, U.S. District Court, Southern District of New York, No. 19-01704.

Reporting by Jonathan Stempel in New York; editing by Jonathan Oatis