Fannie Mae sued nine of the world's largest banks on Thursday, accusing them of colluding to manipulate interest rates and seeking more than $800 million of damages.
In a complaint filed in the U.S. District Court in Manhattan, the government-controlled mortgage company accused the banks of conspiring for many years to suppress Libor, or the London Interbank Offered Rate, including during the 2008 financial crisis.
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Libor underpins hundreds of trillions of dollars of transactions, and is used to set interest rates on such things as credit cards, student loans and mortgages.
But according to Thursday's 71-page lawsuit, "defendants' promises and representations regarding the legitimacy of Libor were false," causing Fannie Mae to lose money on swaps, mortgages, mortgage securities and other transactions.
The lawsuit adds to the legal headaches over whether banks manipulated Libor and other rate benchmarks to boost profit or appear healthier than they actually were.
Regulators in the United States, Europe and Asia have been investigating many banks over alleged manipulation of Libor and other rate benchmarks.
Four banks sued by Fannie Mae - Barclays Plc , Rabobank , Royal Bank of Scotland Group Plc and UBS AG - have reached regulatory settlements that totaled $3.6 billion and included admissions of wrongdoing.
The scandal also cost the jobs of Barclays' and Rabobank's respective chief executives, Robert Diamond and Piet Moerland.
Other bank defendants in the Fannie Mae lawsuit are Bank of America Corp , Citigroup Inc , Credit Suisse Group AG , Deutsche Bank AG and JPMorgan Chase & Co .
All nine banks declined to comment. Freddie Mac , another government-controlled mortgage company, filed a similar lawsuit in March seeking unspecified damages from more than one dozen banks.
The Fannie Mae lawsuit describes emails and other communications that illustrate the alleged collusion.
In one instance, a rate submitter at Rabobank is quoted as having admitted to have "always used to ask if anyone needed a favor and vice versa ... a little unethical but always helps to have friends in (the market)."
According to the complaint, the banks' Libor submissions were "particularly striking" on days where they settled large swap positions with Fannie Mae. The company estimated that it lost $332 million on interest-rate swaps alone.
"Fannie Mae filed this action to recover losses it suffered as a result of the defendants' manipulation of Libor," a spokesman said. "We have a responsibility to be good stewards of our resources."
The U.S. government bailed out Fannie Mae and Freddie Mac in 2008. Both companies are now overseen by the Federal Housing Finance Agency (FHFA), which tries to conserve and recover assets for the benefit of taxpayers.
In 2011, the FHFA sued 18 banks and financial companies to recover losses that it said Fannie Mae and Freddie Mac suffered on about $200 billion of mortgage securities.
JPMorgan last week became the fourth defendant to settle in that litigation, agreeing to pay $4 billion.
Fannie Mae's lawyers include Kathy Patrick, a partner at Gibbs & Bruns who also represents investors that negotiated an $8.5 billion settlement with Bank of America over mortgage securities from the former Countrywide Financial Corp.
Patrick declined to comment on the Fannie Mae lawsuit.
Shares of Fannie Mae closed up 13 cents at $2.34.
The case is Federal National Mortgage Association v. Barclays Bank Plc et al, U.S. District Court, Southern District of New York, No. 13-07720.
(Reporting by Jonathan Stempel in New York; Additional reporting by Karen Freifeld; Editing by John Wallace, Bernard Orr)