The inquiry centers on whether traders cooperated to benefit the banks they work for
The Department of Justice is investigating potential fraud and antitrust violations by bank traders related to unsecured bonds issued by Fannie Mae and Freddie Mac, according to a report by Bloomberg.
The government-sponsored enterprises have approximately $548 billion of the securities outstanding.
Four people familiar with the matter described the investigation to the publication. The inquiry shows that the administration of President Donald Trump is continuing investigations into market manipulation by banks traders started under the Obama Justice Department.
The investigation, which remains in its early stages, centers on whether traders from various banks worked with one another to benefit the entities they work for. The sources told Bloomberg that investigators are looking at potential fraud and antitrust violations. The banks under investigation could not be determined.
While the two GSEs pool home mortgages into securities, the securities involved in the investigation are the unsecured bonds issued by Fannie and Freddie themselves.
Two of the sources revealed the DOJ prosecutors from both the antitrust and criminal divisions are working on the investigation. While antitrust issues involve collusion to fix prices, criminal lawyers focus on prosecuting fraud charges.
According to the report, it remains unclear whether traders will be prosecuted as a result of the investigation. While the DOJ has been looking into other bond markets for three years already, it has not yet filed any charges.
