A federal watchdog finds that government-controlled Fannie Mae and Freddie Mac may have lost more than $3 billion from big banks' alleged rigging of a key interest rate.

Karen Bleier and Paul J. Richards/AFP/Getty Images

The staff of the inspector general for the Federal Housing Finance Agency, which oversees the two mortgage giants, gave the estimate in an internal memo. It recommended that the FHFA consider suing banks over the LIBOR rate.

Swiss bank UBS agreed Wednesday to pay $1.5 billion in fines and became the second bank fined for trying to manipulate LIBOR, used to price trillions of dollars in contracts including mortgages.

The memo says Fannie and Freddie sustained the losses on $1 trillion in securities linked to the key rate.

Taxpayers so far have paid about $170 billion to rescue the companies.


Copyright 2012 The Associated Press