Business

Fannie Mae and Freddie Mac in '$3bn Libor loss'

  • 20 December 2012
  • From the section Business
freddie mac headquarters
Image caption Fannie Mae and Freddie Mac are the US's biggest mortgage lenders

US mortgage lenders Fannie Mae and Freddie Mac may have lost more than $3bn (£1.8bn) as a result of the Libor scandal, regulators have said.

The estimated loss was given in an unpublished internal memo from a federal regulator responsible for overseeing the two state-owned lenders.

It also said legal action against banks involved in fixing the Libor rate should be considered.

Dozens of institutions are under scrutiny for allegedly rigging Libor.

On Wednesday UBS agreed to pay a total of $1.5bn to UK, US and Swiss regulators after admitting its traders tried to manipulate Libor, while Barclays was fined £290m by US and UK authorities in June.

'Not substantiated'

The potential loss to Fannie Mae and Freddie Mac estimated by the Federal Housing Finance Agency (FHFA) is among the largest so far reported, according to the Wall Street Journal.

The FHFA is responsible for regulating Fannie and Freddie - two state-backed mortgage lenders that between them own or guarantee about 50% of all US mortgages.

In its internal memo it said the $3bn figure had been estimated using company accounts and related to holdings of more than $1 trillion in mortgage-linked securities, interest rate swaps and other assets.

In a statement the regulator said it had "not substantiated" any Libor-related losses at the two lenders, and had "not made any determination regarding legal action" against banks.

A total of 18 banks help determine the Libor rate - the interest rate at which banks based in London lend to each other. The rate has an impact on global lending rates.

Traders at different institutions are accused of colluding with each other to fix the rate.

Any losses made by Fannie Mae and Freddie Mac would impact US taxpayers, following the government bailout of the two institutions in 2008. It has already cost the government around $137bn in bailout funds.

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