National Credit Union Administration (NCUA) Sues Goldman For Sales Of MBS Causing Credit Unions To Fail
Goldman Sachs has been sued by the National Credit Union Administration (NCUA) for $1.2 billion, according to Bloomberg. The lawsuit alleges that Goldman misrepresented the mortgage backed securities (MBS) that it sold to its member credit unions who suffered massive losses leading to their demise. Some of the credit unions that failed due to MBS losses were Western Corporate Federal Credit Union (WesCorp) and the U.S. Central Federal Credit Union, two of the largest countrywide.
According to the pleadings, Goldman Sachs is alleged to have misrepresented material facts in the marketing materials, prospectuses and sales of the mortgage backed securities (MBS) causing the credit unions to think that the risk and potential for loss was minimal. Goldman was bound to provide investors with a full and adequate disclosure of the risks involved with the mortgage backed securities (MBS), which was their responsibility as the underwriter and peddler of the securities. The NCUA alleges that the truth is that the investments were risky and the probability of loss was considerable, since the MBS were “destined to perform badly” because a majority of the borrowers were virtually assured to default. They are demanding more than $491 million in compensatory damages from Goldman.
In addition to this lawsuit, the NCUA has filed four (4) others seeking almost $2 billion in compensatory damages for its wholesale credit union members. Two of the suits named JP Morgan Chase and Royal Bank of Scotland for allegedly deceiving credit unions in the sale of risky MBS. Debbie Matz, NCUA Board Chairman, said that it is their responsibility to continue to fight to “hold responsible parties accountable” and to “seek maximum recoveries.” Since the financial meltdown of 2008, the number of credit unions succumbing to the mortgage crisis has spiked to over 40. Southwest Corporate, Members United Corporate and Constitution Corporate are presently in NCUA conservatorship, all believed to have failed due to similar investments in MBS.
Please call our securities law firm at 1-800-259-9010 for a confidential consultation regarding the losses your pension funds or credit unions have suffered.