FBI investigating yet more market manipulation

|By:, SA News Editor

The FBI suspects traders at two unnamed banks of conspiring to manipulate rates on major orders from Fannie Mae (FNMA) and Freddie Mac (FMCC) or of front running the government-sponsored enterprises (GSE) in the markets for interest-rate swaps.

Front running is using advanced knowledge of an order to make a transaction first.

Senior management at the banks "planned and encouraged this behavior because it led to higher revenue for their respective parent banks," an FBI bulletin says.

However, the agency isn't confident it can prosecute, because the transactions involved appear to be legitimate.