GSE Bonds Antitrust Litigation

Government-Sponsored Entities (“GSEs”) are federally created private enterprises, such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. To fund their operations, GSEs issue trillions of dollars in debt, underwritten by large financial institutions (“GSE Bond Dealers”). Plaintiffs allege that the leading GSE Bond Dealers engaged in a horizontal conspiracy to fix the price of GSE Bonds. Through electronic chat rooms and other means, GSE Bond Dealers allegedly agreed to pricing floors for GSE Bonds when new issuances were declared “free-to-trade” in the secondary market. Plaintiffs retained Dr. Hal Singer to be their testifying expert for class certification. Dr. Singer’s report demonstrated that data and methods common to all class members could prove anticompetitive effects, common impact, and aggregate damages to the class. Dr. Caves developed an econometric bond pricing model to measure artificial inflation in GSE Bond prices attributable to the alleged conspiracy using a nonparametric representation of the price formation process. The econometric model was buttressed by an algorithm analyzing tens of thousands of electronic communications for indicia of potentially anticompetitive conduct among GSE Bond Dealers. Shortly after Dr. Singer issued his expert report, settlements totaling $386.5 million from sixteen large banks and financial services companies were announced.