The Federal Deposit Insurance Corp. has filed a lawsuit against 16 of the world's biggest banks, accusing them of fixing the London interbank offered rate and costing smaller, failed American banks money.

Bloomberg explains it like this:

"The FDIC, acting as receiver for 38 failed banks including Washington Mutual Bank, IndyMac Bank FSB and Colonial Bank, claimed that institutions sitting on the U.S. dollar Libor panel 'fraudulently and collusively suppressed' the U.S. Libor rate. Also named in the suit, filed today in Manhattan federal court, is the British Bankers Association, an industry group.

"The failed banks 'reasonably expected that accurate representations of competitive market forces, and not fraudulent conduct or collusion,' would determine the benchmark, the FDIC said in its complaint.

"Regulators around the world have been probing whether firms colluded to manipulate interest-rate benchmarks including Libor, which affects more than $300 trillion of securities worldwide. Financial institutions have paid about $6 billion so far to resolve criminal and civil claims in the U.S. and Europe that they manipulated benchmark interest rates."

Essentially, the FDIC claims, the manipulation of the Libor rate cost it money, because the banks it took over had to pay higher prices for Libor-based products.

CNN Money reports the FDIC called the losses "substantial."

Bank of America, Citigroup and Credit Suisse are among the banks being sued.

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