A federal judge on Monday indicated he plans to dismiss National Credit Union Administration (NCUA)’s suit against RBS Securities for the sale of failed MBS to WesCorp Federal Credit Union, a ruling that potentially jeopardizes all of NCUA’s claims against Wall Street banks for the failure of the five corporate credit unions.

U.S. Judge George Wu told NCUA he was not convinced by additional arguments since his Dec. 19 temporary ruling that the credit union regulator failed to prove that RBS misled WesCorp about the riskiness of some $1.2 billion of MBS it sold to the one-time $34-billion corporate credit union.

The suit is filed in U.S. District Court for the Central District of California, which has jurisdiction over WesCorp, based in nearby San Dimas.

The ruling could jeopardize several other suits brought by NCUA against Wall Street banks JPMorgan Chase, Goldman Sachs and Wachovia Securities (the latter now a unit of Wells Fargo) for their sale of failed MBS to corporate.

Last week, JPMorgan pointed to Wu’s temporary December ruling in asking a federal court in Kansas to dismiss NCUA’s suit against it for the sale of MBS to U.S. Central Federal Credit Union, Members United Corporate Federal Credit Union and Southwest Corporate Federal Credit Union, as well as WesCorp. That suit is filed in U.S. District Court for the District of Kansas, which has jurisdiction over Lenexa, Kan.-based U.S. Central.

In his December ruling, Wu, who also is presiding over NCUA’s civil negligence suit against top executives of WesCorp, said NCUA has failed to show that RBS disregarded its own underwriting standards in the creation of and sale of the MBS, which are the same allegations NCUA has made against the other Wall Street banks.

NCUA claims the sellers and underwriters of the WesCorp MBS made numerous material misrepresentations to WesCorp in the offering documents for the securities that went bad just months after their sale. These misrepresentations caused WesCorp to believe the risk of loss associated with the investment was minimal, when in fact the risk was substantial, according to NCUA. The MBS experienced dramatic, unprecedented declines in value, effectively rendering WesCorp insolvent. NCUA estimates the WesCorp failure will cost $7 billion, which will be accrued to all federally insured credit unions in the form of a corporate assessments.

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