National Credit Union Administration (NCUA) Chairman Debbie Matz hailed Wednesday’s federal court ruling denying a bid by Wall Street banks to dismiss NCUA’s suits regarding corporate credit union investments and said the agency is determined to see the cases through.
“NCUA is pleased that the court recognized the central merits of our complaints and allowed the cases to move forward. The Wall Street firms that created and sold these securities materially misrepresented the inherent level of risks to investors,” Matz said. “We will continue to vigorously pursue these lawsuits, and the others previously filed. As liquidating agent for U.S. Central, NCUA has a duty to maximize recoveries from responsible parties in order to limit losses to the federally insured credit union system.”
She was referring to a Wednesday ruling denying motions by Royal Bank of Scotland’s RBS Securities and Wells Fargo to dismiss NCUA’s claims that the two banks were negligent in the sale of RMBS to U.S Central Federal Credit Union and WesCorp Federal Credit Union.
As liquidating agent for the failed U.S. Central, NCUA filed two lawsuits against RBS Securities, Wachovia, and nine other defendants who were involved in issuing 29 RMBS purchased by U.S. Central. The lawsuits, which were consolidated by the court, alleged violations of federal and state securities laws and misrepresentations in the sale of the securities to U.S. Central. The court granted part of the defendants’ motions to dismiss and denied the remainder, with the result that 80% of the claims continue forward.
The lawsuits covered by the court’s ruling are similar to several other cases previously filed by NCUA as liquidating agent for U.S. Central and Western Corporate Federal Credit Union (WesCorp) against JPMorgan Securities, Goldman Sachs and others. NCUA has previously settled claims worth $170.75 million with Citigroup, Deutsche Bank Securities and HSBC.
Losses from the failures of U.S. Central, WesCorp and three other corporate credit unions are paid from the Temporary Corporate Credit Union Stabilization Fund. Expenditures from this fund must be repaid through assessments against all federally insured credit unions. Net proceeds from the settlements received to date and any future recoveries will allow NCUA to minimize losses from the five corporate credit union failures and reduce the total amount that all credit unions have to pay for the corporate credit union system’s losses.