Sales to Southwest and Members United Caused Corporates’ Collapse
ALEXANDRIA, Va. (Sept. 23, 2013) – The National Credit Union Administration today filed nine lawsuits in Federal District Court in New York against Morgan Stanley & Co., Inc. and eight other institutions over the sale of nearly $2.4 billion in mortgage-backed securities to Southwest and Members United corporate credit unions.
“We continue to pursue accountability and recovery in the wake of billions of dollars in sales of faulty securities that led to the collapse of several corporate credit unions and handed the industry the costly bill of paying for the losses,” NCUA Board Chairman Debbie Matz said. “All the credit unions we supervise and insure are sharing those costs. The people who are responsible should be required to shoulder that burden, as well.”
Defendants Morgan Stanley & Co., Inc. and Morgan Stanley Capital I Inc., Barclays, J.P Morgan/Bear Stearns, Credit Suisse, Royal Bank of Scotland and UBS sold faulty securities to both corporate credit unions. Goldman Sachs, Wachovia and Residential Funding Securities, LLC, now Ally Securities, sold faulty securities to Southwest. The suits make claims under either federal or state securities laws.
In all, five corporate credit unions failed as a result of the purchase of faulty mortgage-backed securities.
Southwest and Members United corporate credit unions paid more than $416 million for the securities in question in the Morgan Stanley suit and more than $1.9 billion for securities sold by the other defendants.
NCUA’s suits allege the firms made misrepresentations in connection with the underwriting and subsequent sale of the mortgage-backed securities. The corporate credit unions became insolvent, were subsequently placed into NCUA conservatorship and later liquidated as a result of losses from these faulty securities. These failures subsequently caused significant losses to the credit union system.
NCUA Complaints – Filed September 23, 2013