Fannie-Freddie Bond Rigging Suit Settles for $337 Million

Citigroup, Barclays, and the other global banks accused of rigging the $550 billion market for bonds backed by Fannie Mae and Freddie Mac will pay $337 million to settle the antitrust claims facing them in Manhattan federal court.

Barclays Capital Inc. agreed to pay $87 million to resolve the market manipulation allegations, while a group of 12 other financial institutions—including affiliates of Citi, JPMorgan, and UBS—reached a $250 million deal, according to court papers filed Dec. 16.

The plaintiffs’ lawyers are asking for $74 million, or 22% of the total recovery, they said in their motion for preliminary approval of the settlements. The motion doesn’t provide details about which banks will pay how much under the group settlement agreement.

The proposed antitrust class action claims that some of the world’s leading financial firms colluded to narrow the spread between what they pay over the counter for Fannie-Freddie bonds and what they receive for them.

The case is consolidated in the U.S. District Court for the Southern District of New York, where it was filed by seven pension funds, Pennsylvania’s state treasurer, and the city of Baltimore.

Judge Jed S. Rakoff let the suit move forward against four of the banks in August. After Deutsche Bank AG settled and began cooperating, he gave the rest of the case the green light in October.

Chat logs show the banks crossing the line in industry chatrooms where they’re allowed to cooperate as co-underwriters during the “syndication” phase of a new bond issue, but not to discuss prices on the secondary market, the judge found. He called the transcripts “the rare smoking gun.”

Affiliates of First Tennessee Bank also settled in September.

The plaintifffs sought class certification last month. About a week later, Goldman Sachs & Co. agreed to pay $20 million to settle its share of the suit on undisclosed terms. Rakoff preliminarily approved the Goldman settlement Dec. 12.

The newly disclosed agreements, “if approved, would resolve all claims against all defendants in this action,” according to the plaintiffs’ motion.

A suit making similar claims is proceeding separately in Louisiana federal court, where it was filed by the state. The banks moved to dismiss that case late last month, saying it’s a nearly verbatim copycat.

The case is In re GSE Bonds Antitrust Litig., S.D.N.Y., No. 19-cv-1704, motion for preliminary settlement approval filed 12/16/19.