NCUA Sues J.P. Morgan, WaMu, Others Over $2.2 Billion In Securities Sales to Corporates
The agency alleges federal and state securities laws were violated when $2.2 billion of mortgage-backed securities were sold to three corporates.
J.P. Morgan Securities acquired Washington Mutual in 2008.
WaMu Capital Corp., Long Beach Securities Corp., and WaMu Asset Acceptance Corp. are also named as defendants in the suit.
The suit, which was filed late Friday in a U.S. District Court in Kansas, alleges that the firms made misrepresentations in connection with the underwriting and subsequent sale of $2.2 billion in mortgage-backed securities to three corporate credit unions--U.S. Central FCU, Western Corporate FCU and Southwest Corporate FCU.
The NCUA's complaint charges that underwriting guidelines in the offering documents were "systematically abandoned." Securities that were sold to the three corporates were "significantly riskier than represented in the offering documents," and the securities "were destined from inception to perform poorly," the NCUA complaint adds.
All three corporate credit unions failed as a result of these purchases, the NCUA alleges.
"The damage caused by the actions of firms like Washington Mutual has been extremely expensive to contain and repair, and that job isn't finished, yet," NCUA Chairman Debbie Matz said announcing the new lawsuit. "All the credit unions we supervise and insure have had to share this burden, so it's only right that the people who caused the damage be required to pick up that burden, as well."
This is the third time the agency has taken action against J.P. Morgan Securities. In December, in the largest suit filed by the agency, the NCUA took taken legal action against J.P. Morgan Securities and Bear, Stearns & Co. over $3.6 billion in mortgage-backed securities sold to four corporate credit unions.
The NCUA has also filed suit against Credit Suisse (USA), RBS Securities, Goldman Sachs, Barclays Capital and Wachovia, and each of these suits are progressing through the court system. The agency has settled with Citigroup, Deutsche Bank Securities, and HSBC, avoiding the cost of litigation and bringing in more than $170 million in funds that were lost due to the corporate credit union investments.
For the full NCUA release, use the resource link.