Freddie Mac sues banks over rigged Libor; MF Global Holdings settlement

March 20, 2013
HOUSING
Freddie Mac sues banks over Libor fix

Freddie Mac has sued 15 big banks, including JPMorgan Chase, Bank of America and Citigroup, accusing them of rigging a key interest rate and causing huge losses for the government-controlled mortgage giant.

Freddie filed the lawsuit Thursday in federal court in Alexandria. It names the banks that set the London interbank offered rate, known as Libor, which provides the basis for trillions of dollars in contracts around the world, including mortgages, bonds and consumer loans.

In a growing scandal, two big British banks and Switzerland’s largest bank have been fined hundreds of millions of dollars by U.S. and British regulators for manipulating Libor.

A U.S. watchdog found that Freddie and its sibling, Fannie Mae, together may have lost more than $3 billion on their investments from banks’ rate-rigging.

The staff of the inspector general for the Federal Housing Finance Agency, which oversees Freddie and Fannie, gave the estimate of the losses late last year. The staff’s memo said that Freddie and Fannie sustained the losses on $1 trillion in mortgage securities and other investments linked to Libor.

— Associated Press

BANKING
JPMorgan to pay
ex-MF Global clients

JPMorgan Chase has agreed to a deal that will return $546 million to former customers of trading firm MF Global Holdings, which collapsed in 2011 with $1.6 billion missing from its accounts.

MF Global failed in October after a calamitous bet on European debt spooked its investors, partners and clients. JPMorgan held MF Global funds in several accounts and processed the firm’s securities trades. The ­trustee tasked with getting customers’ money back, James W. Giddens, threatened to sue the New York bank if it didn’t return money that was transferred to it from MF Global. By June 2012, JPMorgan had returned $608 million to the firm.

Under a settlement agreement filed Tuesday in Manhattan bankruptcy court, JPMorgan Chase has agreed to pay $100 million to reimburse customers and will relinquish claims on $417 million that it previously returned. ­JPMorgan also will return over $29 million that it is holding as security on an MF Global credit line. The recovered money will be passed along to customers.

— Associated Press

Also in Business

l  FedEx said Wednesday that third-quarter profit fell 31 percent as customers shifted to slower and less-expensive international air-shipping options, and it cut its forecast for full-year earnings. It said it will cut capacity to and from Asia starting next month and might retire some of its older airplanes. Shares tumbled the most since September 2011, ­falling 6.9 percent, to $99.13. FedEx Corp. said its net income fell to $361 million in the three months ended Feb. 28, down from $521 million a year earlier.

l  General Motors is recalling nearly 34,000 Buicks and Cadillacs in the United States, Canada and elsewhere to fix a problem with the automatic transmissions. The recall affects Buick ­LaCrosse full-size cars and Cadillac SRX crossover SUVs from the 2013 model year. The automaker says a software problem can cause transmissions to unexpectedly shift into sport mode. That can override any slowing effect from the transmission, increasing the risk of a crash. GM says no crashes or injuries have been reported.

l  Boeing came under growing pressure Wednesday to compensate airlines in hard cash for disruptions caused by the grounding of its 787 Dreamliner as two airlines maneuvered for immediate help instead of future purchase discounts. Leading 787 customer All Nippon Airways wants cash refunds, rather than discounts on future orders, for losses inflicted by the global grounding since mid-January, a person familiar with the airline’s intentions told Reuters. In India, a senior government source said state carrier Air India would take the same stand in favor of direct refunds.

l  Barclays, Britain’s second-largest bank by assets, paid nine senior executives $61 million in bonuses, less than a year after the bank was fined for manipulating benchmark interest rates. Rich Ricci, head of its investment bank and one of the last members of former chief executive Robert Dia­mond’s management team, was awarded 5.7 million shares valued at $26.6 million, London-based Barclays said Wednesday in a statement. Chief executive An­tony Jenkins was given 1.8 million shares valued at $8.5 million.

l  Intertrust Technologies, a developer of digital rights management software jointly owned by Sony and Royal Philips Electronics, sued Apple for allegedly infringing 15 patents related to ­mobile-device security. Apple’s iPhone, the iPod touch, iPad product lines, laptop computers, ­Apple TV and App Store are built on secure computing technologies developed and patented by Intertrust, the company said in a complaint filed Wednesday in a federal court in Oakland, Calif. Amy Bessette, a spokeswoman at Cupertino, Calif.-based Apple, declined to comment on the patent lawsuit.

— From news services

Coming Today

l  8:30 a.m.: Weekly jobless claims released.

l  10 a.m.: Existing-home sales and leading indicators for February.

l  Earnings: Lululemon Athletica, Nike

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