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Fannie Mae sues banking giants

November 1, 2013

Deutsche Bank and eight other global banks are sued for damages by US mortgage lender Fannie Mae. The bailed-out group claims it has accrued heavy losses because the banking majors manipulated a key interest rate.

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Image: picture-alliance/dpa

Fannie Mae was seeking damages to the tune of more than $800 million (590 million euros) as a result of losses to that amount it had accumulated due to manipulation of the Libor interest rate, the US-based mortgage lender announced Thursday.

The banks facing litigation would include Germany's biggest lender Deutsche Bank, in addition to Bank of America, Citigroup, JPMorgan Chase, Royal Bank of Scotland, Barclays, Rabobank, and Swiss lenders UBS and Credit Swiss.

Fannie Mae holds the banks responsible for losses on its investments because the nine banking giants are alleged to have rigged the London Interbank Offered Rate (Libor), which is a key interest rates for loans and mortgages.

Fannie Mae and its smaller subsidiary Freddie Mac had to be rescued by the US government in the wake of the American subprime mortgage crisis in 2008. According to the US Federal Housing Finance Agency, which oversees the two bailed-out lenders, Fannie and Freddie lost more than $3 billion due to the Libor manipulations. Freddie Mac already filed a similar lawsuit against 15 Libor-setting banks in March.

The spokespersons of the banks involved declined to comment on the lawsuit. But Deutsche Bank said this week it had already set aside 4.1 billion euros in provisions for this type of litigation.

uhe/mz (Reuters, AFP, AP)