Trading in Fannie and Freddie Mac Unsecured Bonds Probed by U.S. Regulators
Since November 2018 GFE’s NYC office has seen an interesting uptick in requests for Experts in the primary and secondary US Agency Bond market, from what would typically be bank defence side clients.
Is the U.S. Department of Justice (DoJ) becoming more active in respect of criminal probe announced in June 2018? It would appear so. We also assume that the flurry of requests indicates that there are not a lot of non-conflicted experts at this stage.
In June 2018 the federal government opened a criminal investigation into whether traders manipulated prices in the $550 billion market for corporate bonds issued by Fannie Mae and Freddie Mac. This investigation follows similar investigations into other bond markets, the Treasury and SSA bond markets, as well as the interest rate and foreign exchange.
The latest inquiry is in its early stages and focuses on whether traders at banks coordinated with one another in order to benefit the institutions they work for. Investigators are looking at potential fraud and antitrust violations. The identity of the banks under scrutiny couldn’t be determined.
The investigators are looking not into the mortgage securities issued by the two companies to finance home purchases but rather at the primary and secondary market for US Agency Bonds, including Fannie’s and Freddie’s unsecured corporate bonds.
Prosecutors from the Justice Department’s antitrust division and criminal division are working on the investigation, according to two of the people. Antitrust lawyers focus on collusion to fix prices, while the criminal division is responsible for prosecuting fraud charges.
GFE Experts have been retained by two separate law firms on this matter