WASHINGTON (AP) — A federal watchdog has found that government-controlled Fannie Mae and Freddie Mac may have lost more than $3 billion from big banks' alleged rigging of a key interest rate.
The staff of the inspector general for the Federal Housing Finance Agency, which oversees the two mortgage giants, gave the estimate in an internal memo obtained by The Associated Press. It recommended that the FHFA consider suing banks over the LIBOR rate.
Switzerland's largest bank, UBS, agreed Wednesday to pay $1.5 billion in fines, becoming the second bank fined for trying to manipulate LIBOR. The rate is used to price trillions of dollars in contracts including mortgages and credit cards.
LIBOR, or the London Interbank Offered Rate, is set daily using information that banks provide.
The memo says Fannie and Freddie sustained the losses on $1 trillion in mortgage securities and other investments linked to the key rate. The Wall Street Journal first reported on the memo Wednesday.
Taxpayers so far have paid about $170 billion to rescue Fannie and Freddie, which suffered huge losses from risky mortgages and were bailed out by the government in September 2008 at the onset of the financial crisis.
Fannie and Freddie together own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans.