Wednesday, March 23, 2011 11:25:00 AM
According to today's Wall Street Journal, NCUA is planning to sue several investment banks unless they refund over $50 billion of mortgage-backed securities sold to five seized corporate credit unions.
The NCUA is accusing Goldman Sachs Group Inc., Bank of America Corp.'s Merrill Lynch unit, Citigroup Inc., and J.P. Morgan Chase & Co. of misrepresenting the risks of the bonds to the corporates, which "loaded up on the bonds in their role of investing on behalf of retail credit unions," according to people familiar with the situation that spoke to the Wall Street Journal.
According to the article, this is an example of federal regulators starting to "flex their legal muscle against executives, directors, and outsiders blamed for the demise of financial institutions during the crisis."
Recently, the FDIC filed lawsuits seeking to recover more than $3.5 billion from officers and directors at failed banks.
In response to the NCUA's plans to sue, Goldman Sachs, in a securities filing this month, "has stated that it intends to pursue...on behalf of certain credit unions for which it acts as conservator" claims that offering documents for certain securities Goldman sold "contained untrue statements of material facts and material omissions."
The article can be found in its entirety here.