By Tyler Durden

Goldman Sachs and four other financial firms are facing claims that they rigged the $550 billion market for bonds backed by Fannie Mae and Freddie Mac, according to Bloomberg.

In the Southern District of New York, a proposed class action suit accuses the institutions of driving down the offer that they bought unsecured bonds at and “pumping” up the bid at which they sold them over the counter.

U. S. Southern District of New York Judge Jed S. Rakoff allowed the case to proceed against Goldman Sachs, Deutsche Bank Securities Inc., BNP Paribas Securities Corp., Morgan Stanley & Co., and Merrill Lynch.

The judge concluded that traders from these banks engaged in price fixing by using industry chatrooms, which exist primarily so that banks, dealers and co-underwriters can work together on a limited basis to find opening prices for bond issuances. However, in this case, four chat logs instead offered evidence that the traders discussed how to avoid a “race to the bottom” on the secondary market.