Feds Sue Bankers Over Fall in Bonds

[ProSense]

Source: Wall Street Journal

Federal regulators accused J.P. Morgan Chase & Co. and Royal Bank of Scotland Group PLC of duping five large credit unions into buying more than $3 billion in mortgage bonds that were "destined to perform poorly," and that quickly sank the credit unions.

The two civil lawsuits filed Monday in U.S. District Court in Kansas City, Kan., by the National Credit Union Administration are the most aggressive move yet by U.S. regulators to recover losses from Wall Street firms for alleged wrongdoing before and during the financial crisis.

Many of the nation's 7,000 credit unions, which play a critical role in community lending, have been damaged by the mortgage crisis. More than 40 have failed since the start of 2009, and the survivors are being forced to absorb some of the costs of the failures, forcing some to charge higher interest rates on loans and to pay less on customer deposits.

The collapse of the five large institutions, called wholesale credit unions, "resulted in the worst crisis faced by the credit-union industry in its history," said NCUA Chairman Debbie Matz. "We believe numerous parties within the chain, primary underwriters and intermediaries as well, have responsibility."


Read more: http://online.wsj.com/article/SB10001424052702304070104576397590007402016.html

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JPMorgan, RBS Sued by Federal Agency Over Mortgage Bonds

JPMorgan Chase & Co. (JPM) and Royal Bank of Scotland Group Plc (RBS) units were sued by the federal agency that regulates credit unions, seeking to recover money lost on mortgage-backed securities.

The National Credit Union Administration Board, or NCUA, accused the institutions of packaging and selling mortgage bonds with loans that didn’t meet underwriting guidelines. The bonds, sold to federally chartered credit unions, caused more than $800 million in losses, according to the agency.

A material percentage amount of the loans included in the bonds “were all but certain to become delinquent or default shortly after origination,” the regulator said in two complaints filed in federal court in Kansas City, Kansas. It didn’t specify the amount of money sought.

Five so-called wholesale credit unions failed because they purchased mortgage-backed securities that lost about $50 billion, David Small, an NCUA spokesman, said in an interview. After repackaging about $28 billion worth of the bonds and selling $10 billion worth, the final loss to the entire federal credit union system will be between $7 billion and $9 billion, Small said.

http://www.bloomberg.com/news/2011-06-20/jpmorgan-rbs-sued-by-credit-union-agency-over-mortgage-bonds.html

[still_one]

1. They should also sue the rating agencies, S&P, Fitch, and Moodys. All those

rating agencies were accomplices

[wordpix]

5. +1000 and where's the suit against Goldman Sachs?

[ProSense]

7. Goldman Sachs

is under investigation by .

[still_one]

8. The NY AG, but I wouldn't hold my breath /nt

[valerief]

10. Investigate the owner of the USA? That would be like investigating Bush and Cheney for war crimes.

Unheard of!

[Scuba]

2. Bankers swindling their competitors. Credit Union Board Members take note. n/t

[midnight]

3. This sounds like the same business that was pulled on

homeowners...

[florida08]

4. sue them to the max

seems that's the only way any justice will be done..and I wouldn't be surprised to see SCOTUS step in to derail it

[tcaudilllg]

6. A suit is not enough. Criminal charges are in order.

[valerief]

11. Who owns the military when they don't comply? The banks. nt

[Raine1967]

9. K&R

I am very happy to see this news!

[plumbob]

12. This is good. I like it. Perhaps it will grow.

I really do find myself reverting to my lower-class roots some days and daydreaming about public hangings of malefactors of great wealth.

[jwirr]

13. Its getting so the only safe place for your money is under the mattress.

Credit Unions supposedly invest locally.