Pennsylvania Treasurer Joe Torsella announced that his office has initiated a class action in the United States District Court for the Southern District of New York against sixteen financial institutions, including Deutsche Bank, Bank of America and Barclays Bank, for allegedly conspiring to fix the prices of bonds issued by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”). The State Treasurer is the legal custodian of all Commonwealth funds, which exceed $100 billion.
“Time and time again, we have witnessed Wall Street institutions enrich themselves at the expense of Main Street investors with little to no consequence. When I believe that Pennsylvania taxpayers have been taken advantage of, I intend to stand up and fight, and recover for Pennsylvanians what is rightfully theirs. It’s long past time that the big Wall Street institutions remember that the rules apply to them and that breaking them has consequences.”
Pennsylvania Treasurer, Joe Torsella
The complaint alleges that the defendant financial institutions—the largest underwriters of Fannie Mae and Freddie Mac bonds—violated federal antitrust law when they exploited their dominant market position and conspired to unlawfully increase prices by overcharging and/or underpaying investors in Fannie Mae and Freddie Mac bond transactions between 2009 and 2014. The Commonwealth entered hundreds of transactions in Fannie Mae and Freddie Mac bonds directly with several of the named defendants while the alleged price-fixing conspiracy was in effect. Federal government-sponsored securities, such as Fannie Mae and Freddie Mac bonds serve as foundational investments for public agencies seeking highly rated investments in which to place public funds. An initial analysis shows that four Treasury funds have lost millions as a result of the alleged price manipulation including the PA 529 GSP, Fund 99/STIP, old Fund 98 and Fund 198.