Fannie Mae sues Wall St banks over Libor

Fannie Mae is staying on the offensive against Wall Street.

The government-backed firm filed a lawsuit Thursday against nine major banks over their alleged manipulation of Libor, a key interest-rate benchmark.

The suit comes less than a week after a settlement in which JPMorgan (JPM, Fortune 500) agreed to pay Fannie and its sister company, Freddie Mac, $4 billion to settle allegations that it misrepresented mortgage securities sold to the firms.

Fannie says the banks' alleged manipulation of Libor caused it approximately $800 million in losses.

Four banks -- Barclays, UBS, Royal Bank of Scotlandand Rabobank -- have already reached settlements with the Justice Department and other regulators on the issue, paying more than $3.6 billion in fines. A handful of brokersand traders have also been charged individually, with more cases expected.

Libor rates are created through a process overseen by the British Bankers' Association, an industry group, in which a group of large banks are polled on their borrowing costs in various currencies over various time periods. Their responses are then averaged to produce rates that are used as benchmarks for trillions of dollars' worth of derivatives and other financial products, including car loans and adjustable-rate mortgages.

In the four settlements reached so far, the banks have admitted that traders engineered fraudulent Libor submissions to benefit their derivatives positions. The firms also admitted to lowballing their Libor quotes around the time of the financial crisis to appear stronger and more creditworthy.

The other banks named in the Fannie Mae lawsuit are Deutsche Bank (DB), Credit Suisse (CS), Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500) and JPMorgan.

Related: Bank of America warns of fresh U.S. lawsuit

The suit claims that Fannie Mae lost money on mortgages and interest-rate swaps with the defendants when certain Libor rates were set artificially low. The British Bankers' Association is also named in the suit.

"Fannie Mae filed this action to recover losses it suffered as a result of the defendants' manipulation of Libor," the firm said in a statement. "We have a responsibility to be good stewards of our resources."

The banks either declined to comment or did not respond to requests for comment.

Freddie Mac filed a similar lawsuit in March against more than a dozen banks. A variety of other plaintiffs, ranging from individual investors to the brokerage firm Charles Schwab (SCHW, Fortune 500) to the City of Baltimore, have also claimed Libor-related losses.

Fannie and Freddie have been overseen by the Federal Housing Finance Agency since their $187 billion bailout in 2008, prompted by their massive losses on mortgage securities. They have since returned to profitability, paying substantial dividends to the Treasury Department.

The FHFA sued 18 banks back in 2011 for allegedly misrepresenting risky mortgage-backed securities, and has settled with four so far. 

First Published: October 31, 2013: 4:48 PM ET

The Crazy Global Bailed Out Financial Firm Recovery Trade

From the United States to Greece and Spain, fast money is being wagered on the recapitalization of bailed out financial firms that played a central role in the financial crisis of their respective countries. The frenzied speculation on these zombie-like institutions and their penny stocks is being driven by a range of investors, from big-money hedge funds to small individual investors, causing wild and gigantic swings in share prices that have produced both riches and pain.

This is not the first time that financial players have tried to hit home runs off of financial firms that were almost killed by the financial crisis. A few brave and savvy investors made fortunes betting on the recovery of companies like AIG and Citigroup . But this most recent vintage trade, which has included investors betting both long and shot, seems equally daring and maybe even more speculative.

In the U.S. recent trading in the shares of Fannie Mae and Freddie Mac has been a sight to behold. Traded on the over-the-counter bulletin board, Fannie and Freddie, government-sponsored enterprises that were kept alive with $187 billion in bailout funds, saw their shares spike by as much as 500% in May before they collapsed in just a few days. Shares of Fannie Mae started May at 89 cents and traded hands for $5.44 on May 29, before plummeting to $1.37 and rebounding to end the month at $2.10.

Spain's Bankia Decimates Savers As Stock Plummets; Police Officer Stabs Banker Who Sold Him SharesAgustino FontevecchiaForbes Staff

Until very recently, it seemed inconceivable to just about anybody that the common shares of Fannie and Freddie could have any value given that the Obama Administration plans to wind them down. Fannie and Freddie, powerful symbols of the financial crisis and the potential toxic results of government’s heavy participation in the private sector, were placed in conservatorship in 2008 in a way that left slices of their common and preferred shares in private hands. Now, both firms are turning over most of their massive profits to the federal government, but some big financial players are betting that the government could be pushed to recapitalize the companies in a way that would confer real value to the shares. Investors in the preferred shares include hedge fund billionaireJohn Paulson, who made one of the greatest investment fortunes in history betting against subprime mortgage securities prior to the housing bust, and Bruce Berkowitz, whose Fairholme CapitalManagement made big scores in the revitalization of bailed out financial firms like AIG and Bank of America. Both institutional and individual investors seem to have made bets on the common shares, which are more speculative because the preferred would have to be paid back in full before they had any value.

Fannie and Freddie are not the only seemingly unlikely financial institutions that suddenly are in play. Greece is a financial crisis hot spot in the world that has seen its banks become speculative investments again three years after the European Union and International Monetary Fund started to bail them out. Hedge funds run by billionaires like Dan Loeb, James Dinan and Michael Hintze reportedly have been hovering around the recapitalization of Alpha Bank. These big financial players reportedly think they could potentially score huge returns from these banks that played a big role in the financial crisis that has decimated the Greek economy and for a while appeared to threaten the euro. Other Greek banks attempting recapitalizations include Piraeus Bank and the National Bank of Greece. Alpha Bank, which has seen its shares jump 30% this year, raised more than €450 million from private investors last week in a rights offering that was oversubscribed. That means the bank will avoid being nationalized. But trading Greek bank shares requires a strong stomach– shares of Piraeus Bank have dropped by 40% this year.

Just look at Spain if you want to get a sense of how these kinds of trades can really go crazy. A few days ago the big nationalized Spanish lender, Bankia, listed new shares as part of a recapitalization that forcibly made bondholders, many of whom were individual retail clients of the bank, into stockholders. The outcome was ugly as Bankia’s shares plummeted by 50% in trading leading up to the share listing in late May and remained volatile after the recapitalization took place. Hedge funds had been reportedlyshorting Bankia’s shares. One prominent hedge fund, GLG Partners, a unit of the massive Man Group hedge fund firm based in London, had a short position in Bankia as recently as April 17, regulatory filings show.

Spain’s securities regulator has announced it would investigate potential improper shorting of Bankia’s stock in the days leading up to the share listing by institutional investors, who may have managed to unload their positions early through naked shorting while retail clients, who had been sold hybrid fixed income investments, were blocked from selling until the listing had taken place. One police officer in Valencia, Spain, ended up stabbing a Bankia employee who the cop claimed sold him €300,000 worth of these securities. Mixing national governments with recapitalizing failed financial institutions, hedge funds, and individual investors can be dangerous.

www.forbes.com

Fannie Mae pagará 59.400 millones de dólares a EE. UU.

La compañía hipotecaria fue rescatada en el 2008 en plena crisis inmobiliaria.

Fannie Mae, uno de los gigantes hipotecarios rescatados por el Gobierno estadounidense en el 2008, anunció ayer que pagará 59.400 millones de dólares en dividendos al Tesoro por los beneficios récords obtenidos en el primer trimestre del año.

Con este pago, que se hará efectivo en junio, Fannie Mae habrá pagado un total de 95.000 millones de dólares en dividendos al Tesoro desde su intervención en el 2008, de acuerdo con los ejecutivos de la compañía.

En el primer trimestre del año la hipotecaria registró una ganancia neta de 58.700 millones de dólares, frente a los 2.700 millones del mismo periodo de 2012.

Según Fannie Mae, sus beneficios récords entre enero y marzo estuvieron impulsados por el aumento en los precios de la vivienda y la caída en el número de créditos morosos.

Fannie Mae fue rescatada en el 2008, y desde entonces ha recibido unos 117.000 millones de dólares en dinero de los contribuyentes.

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