JP Morgan & RBS Sued for Duping Credit Unions
JP Morgan Chase & Company (JPM) and Royal Bank of Scotland Group PLC (RBS) have been sued for duping five credit unions into buying over $3 billion in mortgage backed bonds that were “destined to perform poorly, according to the Wall Street Journal. The National Credit Union Administration (NCUA) filed the suits in Kansas City, Kansas to recover losses from the two firms for their wrongdoings up to and during the financial crisis. The five credit unions collapsed amid the massive losses and were unable to recover. The article said that over 40 of the nations credit unions have failed since the beginning of 2009 and many of the 7,000 have been damaged by the losses but have survived. Debbie Matz NCUA Chairman has said that the losses sustained as a result of these investments “resulted in the worst crisis faced by the credit union industry in its history.”
The credit union failures resulted in the NCUA holding $50 billion worth of the mortgage bonds that are now worth only a small fraction of their original value. The NCUA, a federal regulator that supervises the nation’s credit unions, is reportedly going to file additional lawsuits against as many as eight more Wall Street banks and securities firms that bundled individual mortgages into securities and sold them to the credit unions. In each of the cases, it is alleged that the sales and marketing materials failed to disclose the risky nature of the securitized investments. Some of the credit unions involved are U.S. Central Corporate Credit Union, Members United Corporate Credit Union, Southwest Corporate Credit Union, Constitution Corporate Credit Union and Western Corporate Credit Union (WesCorp).
In one instance, U.S. Central bought $120.8 million of the mortgage backed bonds in November 2006 from RBS. Within two months the losses were $1.3 million, $16 million after three months, $26 million after six months and $74.5 million after nine months. After a year the loss was $105.9 million, or 88% of their value.
If you or your credit union has been victimized by massive losses caused by complex securitized investments, please contact our securities law firm for a confidential consultation at 1-800-259-9010.