Federal regulators on Monday sued JPMorgan and RBS in a bid to recover about $840 million in losses on securities tied to high-risk mortgages that were purchased by five wholesale credit unions that failed in the financial crisis. In the lawsuits, filed in federal court in Kansas, the agency is seeking $278 million from JPMorgan Securities LLC and $565 million from RBS Securities Inc.
The NCUA has been negotiating with several Wall Street banks in an effort to reach settlements over the sales of risky mortgage securities, which the banks packaged and sold to investors at the height of the housing boom. The regulators could file suits against five to 10 other banks in the coming weeks if "reasonable" settlements aren't reached, putting the total amount of damages sought in the billions of dollars, the NCUA said.
"Those who caused the problems in the wholesale credit unions should pay for the losses now being paid by retail credit unions," NCUA Chairman Deborah Matz said in a statement.
The agency says the failure of five institutions (U.S. Central, Western Corporate, Southwest Corporate, Members United Corporate and Constitution Corporate) resulted from those losses. It seized the five credit unions, putting them into conservatorship and later liquidating them.
Corporate credit unions provide financing and investment services to the much larger population of retail credit unions. Several of the 28 corporate credit unions in the U.S. sustained steep losses from the depressed value of the mortgage-backed securities they held.
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