NCUA Sues JPM, RBS for Security Fraud
Roberts, Ed, American Banker
Byline: Ed Roberts
The National Credit Union Administration filed suits Monday against JPMorgan Chase and Co. and RBS Securities, claiming fraud in the sale of billions of dollars in private-label mortgage-backed securities the two investment firms sold to five failed corporate credit unions.
In separate suits, NCUA claims violations of federal and state securities laws and misrepresentations in the sale of hundreds of securities. Additional law suits may follow in order to recover losses from the purchase of securities that caused the failures of five corporates.
NCUA is in the process of securitizing $50 billion of toxic MBS sold by Wall Street to the five corporate failures, U.S. Central Federal Credit Union, WesCorp Federal Credit Union, Members United Corporate Federal Credit Union, Southwest Corporate Federal Credit Union and Constitution Corporate Federal Credit Union. The failures are projected to cost NCUA, which is passing the costs on to all credit unions, as much as $20 billion to resolve.
As the liquidating agent for the corporate credit unions, NCUA said it has a statutory duty to seek recoveries from responsible parties in order to minimize the cost of any failure to its insurance funds and the credit union industry.
"NCUA has a responsibility to do everything in our power to seek maximum recoveries from those involved in the issuing, underwriting and sale of the faulty securities that resulted in the failures of five of the largest wholesale credit unions," said NCUA Board Chairman Debbie Matz. …