Home >> News >> Government >> NCUA May File Against Big Banks
Print This Post Print This Post

NCUA May File Against Big Banks

The Wall Street Journal reported Wednesday that the ""National Credit Union Administration"":http://www.ncua.gov/, now controlled by Federal regulators, is threatening to sue several investment banks unless they refund more than $50 billion in securities that were purchased by the five wholesale credit unions that make up the organization.


The NCUA names ""Goldman Sachs Group Inc."":http://www2.goldmansachs.com/, Bank of America Corp.'s Merrill Lynch unit, ""Citigroup Inc."":http://www.citigroup.com/citi/homepage/, and ""J.P. Morgan Chase & Co."":http://www.jpmorganchase.com/corporate/Home/home.htm as the offending parties, claiming they misrepresented the risks of the bonds they sold.


The NCUA loaded up on the bonds in their role investing on the behalf of retail credit unions, and in 2009 and 2010, regulators seized the wholesale credit unions, gaining an overwhelming number of bonds that were worth less than half of their face value.

Aggressive legal action directed at Wall Street seems set to increase, with the ""Federal Deposit Insurance Corp."":http://www.fdic.gov/ (FDIC) recently authorizing the filing of lawsuits seeking to recover more than $3.5 billion from officers and directors at failed U.S. Banks. Additionally, last week the FDIC accused the wives of Washington Mutual Inc.'s top executives at the time of their 2008 demise of illegally moving cash and homes into trusts for purposes of shielding the assets. The Washington Mutual execs call the suit, which sought over $900 million, baseless.

Whether or not the NCUA will succeed in taking the banks to court remains to be seen, and the outcome is an important one since other entities ├â┬ó├óÔÇÜ┬¼"" like the Treasury and FDIC ├â┬ó├óÔÇÜ┬¼"" also hold similar securities, though none have currently made broad legal threats against the banks.
The banks declined to comment on the NCUA allegations.

About Author: Abby Gregory


Check Also

GSEs Affirm Commitment to Equitable Housing Access Nationwide

The Federal Housing Finance Agency (FHFA) has released Fannie Mae's and Freddie Mac's (the GSEs) ...

Subscribe to MDaily

MReport is here for you to stay on top of important developments in the mortgage marketplace. To begin receiving each day’s top news, market information, and breaking news updates, absolutely free of cost, simply enter your email address below.