US regulators sue JPMorgan and RBS
Source: Agencies |
June 22, 2011, Wednesday
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Print Edition
Print Edition
US Federal regulators on Monday sued JPMorgan Chase & Co and Royal Bank of Scotland PLC in a bid to recover about US$840 million in losses on securities tied to high-risk mortgages that were purchased by five wholesale credit unions that failed in the financial crisis.
The National Credit Union Administration is accusing the securities divisions of JPMorgan and RBS of misrepresenting how risky the securities were when they sold them to the corporate credit unions, which failed in 2009 and 2010.
Corporate credit unions provide financing and investment services to the much larger population of retail credit unions. Several of the 28 corporate credit unions in the US sustained steep losses from the depressed value of the mortgage-linked securities they held.
The agency says the failure of the five - US Central, Western Corporate, Southwest Corporate, Members United Corporate and Constitution Corporate - resulted from those losses. It seized the five credit unions, put them into conservatorship and liquidated them.
The agency has been negotiating with other Wall Street banks in an effort to reach settlements over the sales of risky mortgage securities, which the banks packaged and sold to investors at the height of the housing boom. The regulators could file suits against five to 10 other banks in the coming weeks if "reasonable" settlements aren't reached, putting the total amount of damages sought in the billions of dollars, the NCUA said.
In the lawsuits, the agency is seeking US$278 million from JPMorgan Securities LLC and US$565 million from RBS Securities Inc.
The National Credit Union Administration is accusing the securities divisions of JPMorgan and RBS of misrepresenting how risky the securities were when they sold them to the corporate credit unions, which failed in 2009 and 2010.
Corporate credit unions provide financing and investment services to the much larger population of retail credit unions. Several of the 28 corporate credit unions in the US sustained steep losses from the depressed value of the mortgage-linked securities they held.
The agency says the failure of the five - US Central, Western Corporate, Southwest Corporate, Members United Corporate and Constitution Corporate - resulted from those losses. It seized the five credit unions, put them into conservatorship and liquidated them.
The agency has been negotiating with other Wall Street banks in an effort to reach settlements over the sales of risky mortgage securities, which the banks packaged and sold to investors at the height of the housing boom. The regulators could file suits against five to 10 other banks in the coming weeks if "reasonable" settlements aren't reached, putting the total amount of damages sought in the billions of dollars, the NCUA said.
In the lawsuits, the agency is seeking US$278 million from JPMorgan Securities LLC and US$565 million from RBS Securities Inc.
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