Mon, Nov 2, 2015
Total recoveries from litigation against banks that sold faulty residential mortgage-backed securities to corporate credit unions will reach $2.2 billion with the completion of an agreement with Wachovia, the National Credit Union Administration announced.
Wachovia will agree to pay $53 million to resolve the agency’s claims arising from losses related to purchases of the securities by corporate credit unions. NCUA uses the net proceeds to reduce Temporary Corporate Credit Union Stabilization Fund assessments charged to federally insured credit unions to pay for the losses caused by the failure of five corporate credit unions.
“NCUA’s litigation efforts are helping minimize the costs of the corporate crisis to the credit union system, and those efforts will continue,” NCUA Board Chairman Debbie Matz said. “The agency has a statutory obligation to protect credit unions from those costs, and we will pursue the available legal remedies in order to hold the institutions that sold the faulty securities accountable for their actions.”
NCUA filed suit against Wachovia in 2011. Once the settlement is completed, NCUA will dismiss pending claims against the firm in federal district courts in California, Kansas and New York. Wachovia does not admit fault in the settlement.
NCUA continues to pursue litigation in federal courts in New York, Kansas and California against financial firms, including Goldman Sachs, UBS, Credit Suisse and Morgan Stanley, based on the sale of faulty securities that caused the collapse of five corporate credit unions.
The agency has other litigation pending against securities firms alleging violations of state and federal anti-trust law by manipulation of interest rates through the London Interbank Offer Rate (LIBOR) system. NCUA also has pending suits against financial firms alleging their failure to perform their duties as trustees of residential mortgage-backed securities trusts.
NCUA was the first federal regulatory agency for depository institutions to recover losses from investments in these securities on behalf of failed financial institutions.