Feds' Campaign Tagging Banksters With Allegations Over Crappy Mortgage-Backed Paper That Led To Credit Union Failures Continues; More Lawsuits Planned
The Wall Street Journal reports:
- U.S. credit-union regulators filed their second lawsuit against Royal Bank of Scotland Group PLC ["RBS"], alleging that the bank violated securities laws when it sold nearly $1.6 billion in bonds backed by risky mortgages to a now-defunct credit union.
- The lawsuit, filed Monday by the National Credit Union Administration in U.S. District Court in Los Angeles, seeks damages in excess of $629 million and accuses RBS of selling mortgage-backed securities that "were destined from inception to perform poorly."
- The securities were bought by Western Corporate Federal Credit Union, or WesCorp, a wholesale credit union that was seized by the NCUA in March 2009. An RBS spokesman declined to comment on Monday's lawsuit. The lawsuit is the third filed by the NCUA since June—and the second against RBS.(1)
- The NCUA was saddled with roughly $50 billion in bonds following the collapse of WesCorp and other troubled credit unions that loaded up on bonds that got battered during the financial crisis. NCUA officials plan to file a total of five to 10 legal actions in an effort to recover losses.
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- Forty-seven credit unions have failed since the start of 2009. Survivors are being forced to absorb some of the costs of the failures. To offset those costs, some credit unions are charging higher interest rates on loans and paying less interest on deposits.
For more, see RBS Faces Second Suit Tied to a Credit-Union Failure (may require paid subscription; if no subscription, TRY HERE; or GO HERE - then click the appropriate link for the story).
(1) For more on the earlier lawsuits, see Feds Sue Bankers Over Fall in Bonds (requires paid subscription; if no subscription, TRY HERE; or GO HERE - then click appropriate link for the story).
For the earlier-filed lawsuits, see:
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