The National Credit Union Administration (NCUA) has filed a lawsuit in federal district court in Kansas alleging that Morgan Stanley & Co. Inc. and other firms sold more than $566 million in faulty mortgage-backed securities to now-defunct U.S. Central and WesCorp corporate federal credit unions.
‘Firms like Morgan Stanley sold securities that turned out to be faulty, triggering a crisis in the credit union industry that has been extremely expensive to contain and repair, and credit unions are still paying the tab,’ says Debbie Matz, board chairman of the NCUA, in a release. ‘All the credit unions we supervise and insure are sharing this burden. The people who are accountable, those who precipitated this crisis, should be required to shoulder that burden as well.’
The NCUA has also filed suits against Barclays Capital, Credit Suisse, Goldman Sachs, J.P. Morgan Securities, RBS Securities, UBS Securities, Wachovia, Washington Mutual and Bear Stearns, alleging violations of federal and state securities laws in the sale of mortgage-backed securities to five corporate credit unions.
Recently, the 10th Circuit Court of Appeals ruled with the NCUA in its case against major Wall Street firms that sold residential mortgage-backed securities (RMBS) to corporate credit unions, allowing the agency more time to proceed with the lawsuits.
Earlier this year, a Federal District Court judge in Kansas dismissed NCUA's suit seeking recoveries from Barclays Capital, claiming the agency did not file suit in a timely manner. The appeals court ruled that a federal "extender" statute, which allowed NCUA more time to file its lawsuits, does apply in the cases of the agency's claims.
To date, the regulator has settled claims worth more than $335 million with Citigroup, Deutsche Bank Securities, HSBC and Bank of America.
To view a copy of the complaint, click here.