NCUA Sues Investment Banks for $50B Posted by AVCU on 1:47 PM

Today’s Wall Street Journal reports that NCUA is suing 4 major investment banks for return of $50 billion of mortgage-backed securities that was held by five seized corporate credit unions. The credit union regulator is accusing Goldman Sachs, B of A's Merrill Lynch unit, Citigroup, and J.P. Morgan Chase for 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 the WSJ article. NCUA seized the five corporates in 2009 and 2010 and inherited battered bonds now worth about $25 billion, or half of their face value. 

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.

Read the article, which talks about FDIC actions also, in entirety.