Jan. 7, 2013 – NCUA last week filed suit against J.P. Morgan Securities and others over securities law violations in the sale of $2.2 billion in mortgage-backed securities to three now-defunct corporate credit unions.
This suit relates to securities sold to U.S. Central, Western Corporate and Southwest Corporate federal credit unions. It was the second suit filed by the agency naming J.P. Morgan and the 10th filed so far against Wall Street firms in its efforts to recover losses related to the failure of corporate credit unions caught up in the housing finance debacle.
NCUA says recoveries will further reduce losses resulting from the failure of the corporates. Those losses are being paid by the Temporary Corporate Credit Union Stabilization Fund, and fund expenditures are being repaid through assessments on all federally insured credit unions.
“The damage caused by the actions of firms like Washington Mutual has been extremely expensive to contain and repair, and that job isn’t finished, yet,” said NCUA Board Chairman Debbie Matz.
NAFCU has long urged NCUA to pursue all legal means necessary against responsible parties to recoup losses associated with corporate stabilization.
J.P. Morgan Securities is targeted in this suit as successor-in-interest to Washington Mutual Bank, which it acquired in 2008. Other defendants include WaMu Capital Corp., Long Beach Securities Corp. and WaMu Asset Acceptance Corp.
NCUA has similar actions pending against Barclays Capital, Credit Suisse, Goldman Sachs, RBS Securities, UBS Securities, Wachovia and Bear, Stearns (also acquired by J.P. Morgan in 2008). It was the first federal financial institution regulator to recover losses from investments in faulty securities on behalf of insured institutions. To date, it has settled claims worth more than $170 million with Citigroup, Deutsche Bank Securities and HSBC.